EI^GIAL 


'RK. 


Sup, 


A  COURSE 
AND  , 


By 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


[GH-SCHOOLS 
LLEGES. 

A.M., 

yn  Collegiate 

Kellogg't 

glish." 


Professor  c 
and  Po 
"Or 

In  preps  SCHOOL  OF  LAW  ^as  been  to 

write  a  pn  »d  the  lower 

classes  of  LIBRARY  i  exhaustive 

treatise  up 

This  wo  lc  which  the 

pupil  neec  ry,  but  that 

which  has  ers,  enabling 

him  to  spe  le  author  be- 

lieves that  n  possession 

of  an  art,  nee  into  him 

through  ej  cts,  through 

tongue  am  __^__^___  followed  by 

exhaustive  practice  in  Composition — to  this  everything  is  made  tributary. 

When,  therefore,  under  the  head  of  Invention,  the  author  is  leading 
the  pupil  up  through  the  construction  of  sentences  and  paragraphs, 
through  the  analyses  of  subjects  and  the  preparing  of  frameworks,  to 
the  finding  of  the  thought  for  themes  ;  when,  under  the  head  of  Style, 
he  is  familiarizing  the  pupil  with  its  grand,  cardinal  qualities  ;  and  when, 
under  the  head  of  Productions,  he  divides  discourse  into  oral  prose,  writ- 
ten prose,  and  poetry,  and  these  into  their  subdivisions,  giving  the  re- 
quisites and  functions  of  each — he  is  aiming  in  it  all  to  keep  sight  of  the 
fact  that  the  pupil  is  to  acquire  an  art,  and  that  to  attain  this  he  must  put 
into  almost  endless  practice  with  his  pen  what  he  has  learned  from  the 
study  of  the  theory. 

276  pages,  12mo,  attractively  bound  in  doth. 

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-Ce 


TEXT-BOOK 


ON 


COMMERCIAL  LAW; 


A  Manual  of  the  Fundamental  Principles  Governing 
Business  Transactions. 


KOB  THE   USE   OF 

Commercial  Colleges,  High  Schools  and  Academies. 


BY  SALTER   S.  CLARK, 

Counsellor  at  Law, 

REVISER  OP  YOUNG'S  GOVERNMENT  CLASS-BOOK. 


NEW  YORK  : 

CLARK  &  MAYNARD,  PUBLISHERS, 
734  BROADWAY. 

1884. 


COPYRIGHT,  1882,  BY  SALTEK  S.  CLARK, 


JL 


PREFACE. 


THE  design  of  the  author  in  this  volume  has  been  to  present,  simply 
and  compactly,  the  principles  of  law  affecting  the  ordinary  transac- 
tions of  commercial  life,  in  the  form  of  a  class-book  for  schools  and 
commercial  colleges.  Youths  who  are  soon  to  take  an  active  part  in 
business  matters  should  certainly  know  something  of  the  responsi- 
bilities they  are  to  assume,  the  legal  consequences  of  their  acts. 

That  heretofore  this  subject  has  formed  but  a  small  part  of  the  or- 
dinary educational  system,  is  due  partly,  perhaps,  to  the  idea  that 
law  is  too  weighty  and  intricate  to  be  taught  to  the  young.  This 
would  be  so  were  it  taught  at  all  in  detail,  or  technically.  But,  it  is 
thought,  a  book  confining  itself  to  principles,  stating  them  in  the 
plainest  language,  and  presenting  them  as  a  consistent  and  interde- 
pendent system,  would  be  useful. 

A  knowledge  of  principles  is  often  the  only  guide  one  has,  and  it 
must  be  useful  because  it  indicates  the  general  rule.  Every  man 
does  govern  his  actions,  in  business  and  elsewhere,  upon  some  prin- 
ciples gained  or  stumbled  upon  in  the  course  of  his  experience.  But 
it  were  much  better  to  have  these,  and  many  others  which  could  not 
be  learned  from  experience,  planted  in  the  mind  while  it  was  plastic. 
Experience  also  gives  its  principles  merely  as  isolated  facts;  a  book 
does,  or  should,  give  them  in  their  proper  relations,  and  show  how, 
as  is  very  often  the  case,  what  appears  to  be  an  exception  to  some 
rule  is  but  the  application  of  one  more  important.  Again  the  study 
of  its  principles  must  impress  one  with  the  fact  that  law  is  in  the 
main  only  common  sense  and  common  morality,  a  conviction  which 


4  Preface. 

is  in  itself  a  good  guide,  and  sometimes  in  practical  life  the  only 
guide  one  has. 

The  plan  of  the  book  is  as  follows-. 

After  a  short  introduction  upon  the  relations  of  National  anil 
State  law,  and  of  constitutional,  statute,  and  common  law,  it  is 
divided  into  two  parts.  Part  I.  treats  of  principles  applicable  loall 
kinds  of  business,  in  three  divisions  treating  respectively  of  Con- 
tracts, Agency  and  Partnership,  with  a  fourth  division  embracing  the 
subject  of  Corporations  and  a  few  others  general  in  their  nature. 
Part  II.  takes  up  in  order  the  most  prominent  kinds  of  business 
transactions,  paying  chief  attention  to  the  subjects,  Sale  of  Goods, 
and  Commercial  Paper,  and  is  to  a  large  extent  an  application  of  the 
principles  contained  in  the  preceding  part. 

A  few  chapters  on  real  estate  are  added,  as  likely  to  be  useful, 
though  the  subject  is  not  strictly  within  the  title  of  the  book. 

The  chief  aim  has  been  throughout  to  make  it  a  book  practically 
useful,  and  one  easily  taught,  understood,  and  remembered.  As 
subserving  those  purposes  attention  may  be  called  to  the  following 
features  among  others:  the  use  of  schemes  in  graded  type,  which 
summarizing  a  subject  impress  it  upon  the  mind  through  the  eye; 
the  summaries  of  leading  rules  at  different  points;  a  table  of  defini- 
tions; the  forms  of  business  papers  most  frequently  met  with;  and 
the  frequent  use  of  illustrations  and  cross-references. 

It  is  submitted  with  the  hope  that  it  may  not  be  found  unsuited 

to  its  design. 

SALTKR  S.  CLARK. 
NEW  YORK,  1882. 


CONTENTS. 


ANALYSIS. 

INTRODUCTION:  SOURCES  OP  LAW  IN  THE  UNITED  STATES. 

PART  I.  GENERAL  PRINCIPLES  APPLICABLE  TO  ALL  CASES 
Div.     I.  General  Principles  of  Contracts. 
Div.    II.  Agency. 
Div.  III.  Partnership. 
Div.  IV.  Corporations;  Guaranty;  Time  to  Sue. 

PART  II.     PRINCIPLES  OF  PARTICULAR  CASES: 
Div.     I.  Sale  of  Goods. 
Div.    II.  Commercial  Paper. 
Div.  III.  Miscellaneous  Cases. 


REAL  ESTATE. 


Contents. 


INTRODUCTION. 
A  GENERAL  CONSIDERATION  OF  LAW  AND  ITS  SOURCES. 

PART  I. 

GENERAL  PRINCIPLES  APPLICABLE  TO  ALL  CASES. 

DIVISION  I. 
GENERAL  PRINCIPLES  OF  CONTRACTS. 

PAGE 

Chapter        I.  Description  of  Contracts;  their  Binding  Force. .     17 
Chapter       II.  Requisites  of  a  Binding  Contract 20 

a.  Relating  to  the  Nature  of  the  Contract. 

b.  Relating  to  Outside  Circumstances. 

Chapter     III.  Illegal  Contracts 34 

Chapter     IV.  Persons  not  able  to  Contract 27 

Chapter       V.  Assent  to  a  Contract 29 

Chapter     VI.  Consideration 3£ 

Chapter   VII.  Fraud  and  Deceit 34 

a.  Fraud  between  the  Parties. 

b.  Fraud  on  Third  Party. 

Chapter  VIII.  Written  Contracts 36 

a.  Classes  requiring  Writing. 

b.  What  Writing  sufficient. 

Chapter     IX.  Remedies  for  Breach  of  Contract 41 

DIVISION  IL 
AGENCY. 

Chapter     X.  Agency  in  General 48 

Chapter   XI.  Responsibility  of  Principal 51 

a.  Principal's  Relation  to  Agent. 

b.  Principal's  Relation  to  Third  Party. 


Contents.  7 

PAGE 

Chapter  XII.  Responsibility  of  Agent 54 

a.  Agent's  Relation  to  Principal. 

b.  Agent's  Relation  to  Third  Party. 

c.  Responsibility  of  Third  Party. 

DIVISION  III. 
PARTNERSHIP. 

Chapter  XIII.  Relations  of  the  Partners  to  Each  Other 60 

Chapter  XIV.  Relations  of  the  Partners  to  Third  Parties 63 

DIVISION  IV. 
CORPORATIONS;  GUARANTY;  TIME  TO  SUE. 

Chapter     XV.  Business  Corporations 70 

Chapter   XVI.  Guaranty  or  Suretyship 76 

Chapter  XVII.  Limitation  of  Time  to  Sue 78 


PAET  II. 

PRINCIPLES  OF  PARTICULAR  CASES. 

DIVISION  I. 
SALE    OP    GOODS. 

Chapter  XVIII.  Requisites  of  a  Sale 86 

Chapter     XIX.  Incidents  of  a  Sale 93 

Chapter       XX.  Commission  Merchants 96 

Chapter     XXI.  Brokers 99 


8  Contents. 

DIVISION  II. 
COMMERCIAL  PAPER. 

PAGE 

Chapter     XXII.  Notes 105 

a.  Description  of  Notes. 

b.  Negotiability. 

c.  Conditions  of  Negotiability. 

Chapter  XXIII.  Drafts  and  Bills  of  Exchange 117 

Chapter    XXIV.  Checks 126 

Chapter     XXV.  Indorser's  Responsibility 132 

Chapter    XXVI.  Forged  Paper 142 

Chapter  XXVII.  Money 145 


DIVISION  III. 

MISCELLANEOUS  CASES. 

Chapter     XXVIII.  Agreements  for  Personal  Services 155 

Chapter        XXIX.  Transportation  of  Goods 159 

Chapter          XXX.  Shipping 162 

Chapter        XXXI.  Fire  Insurance 165 

Chapter       XXXII.  Marine  Insurance 170 

Chapter     XXXIII.  Life  Insurance 177 

Chapter     XXXIV.  Interest  and  Usury 179 

Chapter       XXXV.  Pledging  of  Property 181 

Chapter     XXXVI.  Banking 188 

Chapter    XXXVII.  Hotel  Keepers 185 

Chapter  XXXVIII.  Telegraphs 189 

Chapter     XXXIX.  Patents 190 

Chapter  XL.  Copyrights 193 

Chapter  XLI.  Trade-Marks 194 

Chapter          XLII.  Bankruptcy 197 


Contents. 


ADDED  CHAPTERS  ON  REAL  ESTATE. 

PAGB 

Chapter     XLIII.  Kinds  of  Interest  in  Real  Estate 209 

Chapter     XLIV.  Rights  Incident  to  Ownership 214 

a.  Rights  over  One's  Own  Property. 

b.  Rights  over  Another's  Property. 

Chapter       XLV.  Deeds 219 

Chapter     XLVI.  Mortgages 225 

Chapter    XLVII.  Recording  of  Deeds  and  Mortgages 231 

Chapter  XLVIII.  Landlord  and  Tenant 235 


Exercises  in  the  Drawing  of  Papers .   ...  245 

Table  of  Definitions 255 

Forms  of  Business  Papers ...  275 

Index. .  807 


SHORT   IKDEX. 


PAGE 

Table  of  Contents 5 

Introduction 11 

Contracts : 17 

Agency 48 

Partnership 60 

Corporations,  Guaranty,  etc • 70 

Sale  of  Goods 86 

Commercial  Paper 105 

Miscellaneous  Cases 155 

Real  Estate 209 

Exercises  in  the  Drawing  of  Papers 245 

Definitions 255 

Forms 275 

Index .  307 


A 

TEXT-BOOK: 

OH 

COMMERCIAL  LAW. 


INTRODUCTION. 

A  GENERAL  CONSIDERATION  OF  LAW,  AND  OF  THE  SOURCES 
OF  LAW  IN  THE  UNITED  STATES. 


1.  Existence  of  Law. — Law  is  a  direction  from  the  govern- 
ing power  of  a  country  to  its  inhabitants,  telling  them  what 
they  must  or  must  not  do.     It  is,  thus,  a  rule  laid  down  by 
a  higher  power,  limiting  the  absolute  freedom  of  the  indi- 
vidual.    Every  civilized  nation  has  its  system  of  written 
law.     Even  half-civilized  nations  and  barbarous  tribes  have 
some  law,  sometimes  written,  and  sometimes  consisting 
merely  of  the  will  of  a  king  or  chieftain.     Thus  among 
human  beings  there  is  a  higher  authority  than  physical 
force.     But  animals  are  without  law.     Each  one  is  abso- 
lutely free.     Among  them  the  strongest  do  as  they  please, 
and  the  weak  ones  suffer  and  have  no  remedy. 

2.  Its  Necessity. — No  country  has  a  perfect  system  of 
law:  human  law  cannot  deal  out  perfect  justice.     But  no 
nation  could  exist  and  be  civilized  without  a  system  of  some 
sort.      Law  in  some  form  will  be  necessary,  as  long  as 
people  remain  less  than  perfectly  just  and  perfectly  wise. 

Note  to  Teacher. — In  a  book  of  this  character  there  is  no  room  to 
do  more  than  suggest  the  ideas  of  these  two  sections.  There  are 
many  ways  in  which  they  may  be  easily  and  profitably  ampli- 
fied and  explained  in  teaching. 


Introduction. 


3.  Each  Nation  has  its  own  laws.     Those  laws  are  su- 
preme within  its  own  boundaries,  and  cannot  be  affected 
by  the  laws  of  any  other  nation,  but  on  the  other  hand 
they  have  no  force  outside  of  those  boundaries.     Thus  the 
laws  of  England  govern  all  persons  and  all  property  within 
English  territory:  the  laws  of  France   govern  those  in 
France.     And  though  the  systems  of  the  different  nations 
upon  commercial  law  have  many  similarities,  because  the 
principles  of  justice  are  always  the  same,  yet  in  many  par- 
ticulars they  widely  differ. 

But  the  laws  of  a  country  do  affect  all  who  are  there, 
whether  they  are  citizens  of  that  country  or  of  some  other. 
Even  when  merely  travelling  we  must  obey  the  laws  of  the 
country  where  we  are.  So  also  if  a  citizen  of  one  country 
has  property  in  another,  in  respect  to  that  property  he  is 
governed  by  the  law  of  the  place  where  it  is  situated. 

4.  The  States  of  our  Union  are,  in  regard  to  most  law 
which  affects  the  private  actions  and  relations  of  men, 
entirely  separate  and  independent  communities.     In  that 
respect  they  are  like  independent  nations.     Each  has  its 
own  laws,  which  have  no  force  beyond  its  own  boundaries. 
Those  laws  affect  not  only  the  citizens  of  that  State  but  all 
people  who  happen  to  be  in  it,  and  they  affect  all  property 
within  that  State,  no  matter  where  its  owner  is. 

5.  Sources  of  Law. — If  now,  considering  any  particular 
State,  we  inquire  what  are  the  sources  of  its  law,  i.e.,  what 
documents  and  books  shall  we  examine  to  find  out  all  the 
law  in  force  within  its  boundaries,  we  find  that  in  each 
State  there  are  five  sources  of  law;  viz.,  the  United  States 
Constitution,  the  laws  of  Congress,  the  State  constitution, 
the  statutes  of  the  State,  and  what  is  called  the  common 
law.     Let  us  consider  first  the  State  constitution. 

6.  State  Constitutions.— Each  State  in  the  Union  has  its 
own  constitution.     This  is  a  written  instrument  adopted 


Introduction.  13 


by  the  people  of  the  State.  It  is  the  foundation  of  all 
State  law.  The  legislature  cannot  change  any  rule  estab- 
lished by  it,  nor  pass  any  law  except  such  as  the  constitu- 
tion allows.  But  constitutions  treat  in  general  only  of 
fundamental  mattei's,  such  as  how  elections  shall  be  held, 
what  officers  the  government  shall  consist  of,  freedom  of 
speech,  etc.  The  regulation  of  commercial  law  directly  is 
left  almost  entirely  in  the  power  of  the  legislature. 

7.  Statutes  and  Common  Law. — These  are  the  two  chief    ?~ 
sources  of  commercial  law  in  any  State,  and  of  these  the 
common  law  supplies  the  greater  part.     Statutes  are  written 
laws  passed  at  different  times  by  the  legislature.     The  com- 
mon law  consists  of  a  great  body  of  unwritten  rules  or  laws, 
not  enacted  one  by  one  by  legislative  authority,  but  estab-     5 
lished  long  ago  in  England  by  long  usage,  and  adopted  by 
the  particular  State  as  a  body  of  law.     The  statutes  are  of 
the  higher  authority,  and  very  often  statutes  are  passed  to 
change  some  rule  of  the  common  law. 

8.  National   Law. — The  last  two  sections  have  treated 
only  of  State  law.     But  we  have  in  this  country,  besides 
each  State  with  its  own  government  and  system  of  law, 
another  government,  higher  than  all.     That  is  called  the 
National  Government  and  is  founded  on  the  United  States 
Constitution,  which  is  the  supreme  law  of  the  land  through- 
out all  the  States.     That  constitution  establishes  a  National 
legislature  (Congress),  to  which  it  gives  power  to  pass  laws 
upon  certain  subjects  enumerated  in  it.     The  laws  of  Con- 
gress have  full  force  throughout  all  the  States,  and  are  of 
higher  authority  than  any  State  constitution  or  law. 

Thus  we  see  that  there  are  in  each  State  two  systems  of 
law,  the  State  and  the  National.  Whenever  they  conflict 
the  former  must  give  way.  But  they  do  not  conflict,  at 
least  in  theory,  for  Congress  has  no  power  to  pass  any  laws 
except  upon  the  subjects  named  in  the  United  States  Con- 


14  Introduction. 


stitution,  and  the  power  of  the  States  to  legislate  upon 
those  subjects  ceases  as  soon  as  Congress  has  exercised  its 
authority.  In  general  the  ordinary  subjects  of  commercial 
law  do  not  come  within  the  power  of  Congress,  but  remain 
within  the  jurisdiction  of  the  separate  States.  We  shall 
therefore  have  occasion  but  seldom  to  refer  to  National  law. 

9.  Uniformity. — One  would  suppose  that  since  each  State 
has  its  own  system  of  law,  these  systems  would  differ  great- 
ly.    But  this  is  not  so.     In  the  main  principles,  such  as 
this  book  treats  of,  they  are  uniform.     The  differences  are 
in  minor  matters.     One  reason  for  this  uniformity  is  that 
all  the  law  has  the  same  historical  origin;  viz.,  the  common 
law  of  England.* 

10.  Ignorance  of  Law. — It  is  a  universal  principle  that 
IGNORANCE  OF  THE  LAW  EXCUSES  NO  ONE.      Every  one 
is  presumed  to  know  all  the  law.     Though  he  does  some- 
thing which  he  would  not  have  done  if  he  had  known  what 
the  law  was,  yet  he  must  bear  all  the  consequences  just  as 
if  he  had  done  it  knowingly.     The  only  reason  for  this 
rule  is  the  present  impossibility  of  having  any  other.     But 
practically  a  person  must  often  act  without  exact  knowledge 
of  the  law.     His  only  feasible  course  in  such  cases  is  to  act 
according  to  what  his  common  sense  teaches  him  is  just 
and  moral,  for  in  the  main  law  is  only  common  justice  and 
morality. 

11.  Contents  of  Book. — The  purpose  of  this  book  is  to 
state  the  chief  principles  of  law  in  the  United  States  govern- 
ing the  ordinary  transactions  of  commercial  life.     Part  I. 
will  contain  general  principles  applicable  to  all  kinds  of 
commercial  transactions;  viz.,  the  general  principles  of  con- 
tracts, of  partnership,  of  agency,  and  some  others.     Part 
II.  will  take  up  in  order  the  ordinary  kinds  of  transactions, 

*  Except  with  regard  to  Louisiana  whose  original  law  was  Spanish. 


Introduction.  15 


such  as  sales,  notes,  drafts,  transportation,  insurance,  etc.; 
will  show  how  the  general  principles  stated  in  Part  I.  apply 
to  each  case;  and  will  also  state  some  additional  principles 
applicable  to  each.  We  shall  consider  first  the  law  of  con- 
tracts, for  it  is  the  foundation  of  all  commercial  law. 


SOURCES  OF  LAW 

in  every  State,  arranged  in  the  order  of  their  relative  authority. 


I.  THE  UNITED  STATES  CONSTITUTION; 
II.  THE  LAWS  OF  CONGRESS, 

upon  subjects  named  in  the  U.  S.  Constitution; 

III.  THE  PARTICULAR  STATE  CONSTITUTION; 

IV.  THE  STATUTES  OF  THE  STATE  ; 
Y.  THE  COMMON  LAW. 

[In  the  above  scheme  each  one  is  of  higher  authority  than  all  below 
it:  where  they  conflict  the  former  must  prevail.] 


PART  I. 

GENERAL  PRINCIPLES  APPLICABLE  TO  ALL  CASES. 


DIVISION  I. 
GENERAL  PRINCIPLES  OP  CONTRACTS. 


CHAPTER  L 

DESCRIPTION   OF   CONTRACTS:  THEIR   BINDING   FORCE. 

1.  A  Contract  is  an  agreement  made  between  two  or 
more  parties.  It  may  also  be  defined  as  a  promise  made 
by  one  and  accepted  by  another;  but  the  words  contract 
and  agreement  are  rather  broader  than  promise.*  Gener- 
ally a  commercial  transaction  between  two  parties  consists 
of  more  than  one  promise,  each  party  promising  something, 
but  the  idea  of  a  contract  is  best  obtained  if  we  think  of 
each  promise  as  a  separate  contract.  Thus  where  one 
agrees  to  do  certain  work,  and  the  other  agrees  to  pay  for 

*  Contract  and  agreement  may  relate  to  either  the  present  or  future: 
promise  means  only  an  agreement  to  do  or  not  to  do  a  particular  thing 
at  some  future  time.  E.g.,  a  sale  of  goods  by  me  to  you,  which  is 
an  agreement  that  they  shall  immediately  cease  to  be  mine  and  be- 
come yours,  is  a  contract,  but  cannot  be  called  a  promise,  because 
there  is  nothing  to  be  done  in  the  future.  It  executes  itself.  Another 
distinction  is  that  one  person  may  make  a  promise:  it  takes  two  or 
more  to  make  a  contract  or  agreement.  In  other  words,  a  promise 
is  not  a  contract  until  the  one  to  whom  it  is  made  accepts  or  assents 
to  it. 


. 


18  General  Principles. 

it,  we  have  two  contracts,  (1)  the  agreement  that  one  shall 
work,  and  (2)  the  agreement  that  the  other  shall  pay;  and 
each  party  agrees  to  both  agreements.  But  in  common 
language  where  all  the  separate  agreements  make  part  of 
the  same  transaction,  or  are  embodied  in  a  single  paper,  we 
speak  of  it  as  one  contract. 

2.  The  Importance  of  the  Subject  of  contracts  is  very 
great.     As  we  shall  see  throughout  the  book,  every  kind  of 
business  is  a  system  of  contracts,  and  its  law  is  in  great 
part  only  the  law  governing  all  contracts.     Nearly  every 
act  in  mercantile  life  is  either  the  making  or  fulfilling  of 
some  agreement.     Thus  every  sale  of  goods,  and  every  note, 
draft,  or  indorsement,  is  a  contract:  every  act  done  by  a 
clerk,  or  other  agent,  in  his  business,  is  but  the  carrying  out 
of  the  contract  originally  made  with  his  employer:  ever}1 
act  of  a  partner  is  only  a  fulfilling  of  the  contract  made 
between  the  partners  when  the  firm  was  formed. 

3.  Freedom  to  Contract. — One  great  principle  of  our  law 

is  that  EVERY    ONE   IS   FREE   TO    MAKE   ANY   CONTRACT   HE 

CHOOSES  TO  MAKE,  except  such  as  are  forbidden  by  law.* 
It  is  the  theory  of  our  system  of  government  to  allow  every- 
thing except  what  is  forbidden;  not  to  forbid  everything 
except  what  is  allowed.  The  latter  might  be  the  theory  of 
a  parental  or  despotic  government.  Consequently  if  we 
wish  to  know  whether  a  thing  is  lawful  or  not  we  examine 
the  law  to  see  whether  it  is  forbidden,  and  if  it  is  not  for- 
bidden it  is  lawful.  The  kinds  of  contracts  forbidden  by 
law  are  very  few,  but  on  the  other  hand  lawful  contracts 
are  very  numerous  and  of  every  conceivable  kind. 

4.  The  Fundamental  Rule  of  law  in  regard  to  contracts 

"IS  that  EVERY    ONE   MUST   FULFILL   EVERY   AGREEMENT   HE 

MAKES,  unless  some  new  agreement  has  changed  or  abro- 
*  See  chapter  on  "  Illegal  Contracts,"  p.  24. 


Contracts.  19 


gated  it ;  i.e. ,  a  person  must  keep  his  promises.*  While 
studying  the  many  and  important  exceptions  to  this  (Chap. 
III.),  we  must  not  forget  that  still  it  is  the  general  rule. 
So  important  is  this  rule  considered  that  the  U.  S.  Consti- 
tution forbids  any  State  to  pass  any  law  which  shall  release 
any  person  from  the  obligation  to  perform  any  contract  he 
has  made.  Its  justice  is  evident;  for  if  one  was  at  liberty 
to  refuse  to  do  exactly  what  he  had  promised,  no  reliance 
could  be  placed  on  any  promise.  Thus  no  one  would  work 
or  do  any  act  for  another,  because  the  other  could  refuse 
to  pay  for  it,  and  no  one  would  pay  in  advance  because  the 
other  could  then  refuse  to  do  the  act. 

5.  Kinds  of  Contracts. — Contracts  are  either  written  or 
oral.     Written  contracts  are  those  put  on  paper,  by  writing 
or  printing :    oral  contracts  are  those  made  by  word  of 
mouth.     Written  contracts  are  express:  oral  contracts  are 
either  express  or  implied.     An  express  contract  is  one  defi- 
nitely expressed  in  words:  an  implied  contract  is  one  im- 
plied from  all  the  circumstances  of  the  transaction. 

6.  Implied  Contracts  are  quite  common,  and  we  shall 
meet  them  frequently.!     They  arise  in  those  cases  where, 
though  there  are  no  words  of  agreement  by  either  party, 
such  as  "  I  agree,"  or  "  I  will,"  or  "  I  promise,"  yet  some- 
thing is  said  or  done  which  in  reality  amounts  to  an  agree- 
ment.    Thus  if  I  buy  goods  in  a  shop  I  am  compelled  to 
pay  for  them,  though  nothing  is  said  about  paying  or  the 
price,  for  my  being  there,  asking  for  the  goods  and  taking 
them  away,  are  equivalent  to  my  saying  "I  will  pay  for 
them."     My  acts  say  what  my  tongue  does  not.     One  is 

*  If  A  and  B  make  an  agreement  to  day,  and  to-morrow  make 
another  modifying  the  first,  the  first  as  modified  by  the  second  must 
be  kept.  This  is  in  effect  keeping  both. 

f  See  p.  20,  sec.  7;  p.  61,  sec.  4;  p.  62,  sec.  7;  p.  63,  sec.  11;  p. 
91,  sec.  12;  p.  95,  sec.  6  and  7;  p.  156,  sec.  2. 


20  General  Principles. 

always  considered  as  having  agreed  to  whatever  he  know- 
ingly leads  another  to  believe  he  has  agreed  to. 

7.  Gratuitous  Services  GIVE  NO  CLAIM  TO  COMPENSA- 
TION. There  is  no  implied  contract,  because  the  services 
were  not  requested.  Were  this  not  so  any  one  might  force 
upon  us,  and  force  us  to  pay  for,  what  we  did  not  want. 
But  if  the  benefit  of  anything  gratuitously  done  is  retained 
when  it  could  be  refused,  there  arises  an  implied  contract 
to  pay. 


CHAPTER  H. 

EEQUISITES   OF  A  BINDING   CONTRACT. 

1.  Seven  Requisites. — We  have  heretofore  stated  that 
the  rule  that  every  contract  is  binding  has  important  ex- 
ceptions.    There  are  six  things  always  necessary,  and  one 
more  necessary  in  certain  kinds  of  contracts.     This  makes 
seven  requisites;  and  if  any  one  of  these  necessary  elements 
is  absent  from  the  contract,  that  contract  is  not  binding. 

Of  these  requisites  the  first  two  relate  to  its  nature,  and 
the  remainder  relate  to  other  circumstances  connected 
with  it.  They  are:  (1)  it  must  be  possible;  (2)  it  must  be 
legal;  (3)  it  must  be  made  by  proper  parties;  (4)  it  must  be 
assented  to  by  each  party;  (5)  it  must  have  a  considera- 
tion; (6)  it  must  be  made  without  fraud;  and  (7)  in  cer- 
tain cases  it  must  be  in  writing  and  signed. 

a.  Relating  to  the  Nature  of  the  Contract. 

2.  Possibility. — A  CONTRACT  TO  DO  A  THING  IMPOSSIBLE 
IN  ITS  NATURE  is  VOID.     Naturally  any  one  is  very  fool- 
ish to  rely  on  such  a  promise,  and  the  law  cannot  attempt 
to  guard  one  against  his  own  folly.     There  are  three  kinds 


Contracts.  21 


of  impossibility:  (1)  that  arising  from  the  nature  of  the 
thing,  as  a  contract  to  cross  the  ocean  in  a  day;  (2)  that 
depending  upon  certain  outside  circumstances,  which  might 
have  been  foreseen,  as  where  the  fulfillment  of  a  contract  to 
transport  goods  by  canal  is  prevented  by  the  freezing  of  the 
canal,  or  an  accident  to  it;  and  (3)  that  depending  upon  the 
personal  disability  of  the  person  contracting,  as  where  one 
agrees  to  do  certain  work  and  finds  that  he  has  not  the  skill. 
It  is  only  in  the  first  case  that  the  promise  is  not  binding, 
for  in  the  other  two  the  tiling  is  not  impossible  in  its 
nature.  In  other  words,  it  is  the  duty  of  one  who  makes 
an  agreement  to  foresee  and  provide  against  all  the  circum- 
stances which  might  prevent  performance.  The  other 
party  has  the  right  to  rely  upon  his  doing  so.  Hence  sick- 
ness does  not  excuse  one,  nor  inability  to  find  an  article 
that  one  has  agreed  to  furnish.  Even  death  does  not  annul 
a  contract,  for,  unless  it  involves  some  personal  skill,  the 
executor  must  carry  it  out. 

3.  Legality. — A  CONTRACT  THE  LAW  FORBIDS  is  VOID. 
Such  would  be  an  agreement  to  smuggle  goods,*  or  to  pay 
a  higher  rate  of  interest  than  that  allowed  by  law.     The 
class  of  illegal  contracts  is  not  large,  and  the  great  majority 
of  commercial  agreements  are  legal.     A  later  chapter  will 
treat  this  subject  more  fully  (Chap.  III.). 

b.  Relating  to  Outside  Circumstances. 

4.  Proper  Parties. — A  CONTRACT  MADE  BY  A  MINOR,  f 

A   LUNATIC,    OR   AN   IDIOT  IS   NOT    BINDING    UPON    HIM.J 

These  persons  are  said  to  be  not  able  to  contract;   i.e., 

*  Smuggling  is  bringing  goods  from  a  foreign  country,  -without 
paying  the  government  the  tax  laid  upon  them,  called  the  duty. 

f  A  person  under  twenty-one  years  of  age. 

|  Formerly  married  women  were  not  able  to  contract,  but  they 
now  are  under  some  circumstances  (p.  29). 


General  Principles. 


they  cannot  make  a  binding  contract.  All  other  persons 
are  able  to  contract.  Those  who  cannot  contract  them- 
selves cannot  do  it  by  agents.  The  subject  of  parties  will 
be  treated  in  a  later  chapter  (Chap.  IV.). 

5.  Assent.  —  A  PROPOSITION  NOT  ASSENTED  TO  BY  BOTH 
PARTIES  is  NOT  BINDING.     A  promise  not  accepted  is  void. 
Assent  is  implied  in  the  word  agreement,  for  it  takes  two 
to  agree.     Thus  an  offer  is  not  a  contract  until  it  has  been 
accepted.     The  ways  in  which  assent  may  be  given  will  be 
more  fully  treated  in  Chapter  V. 

6.  Consideration.  —  A  PROMISE  WITHOUT  CONSIDERATION 
is  NOT  BINDING.     The  consideration  of  a  promise  is  the 
thing  given,  done,  or  promised  by  the  other  party,  as  a 
reason  for  which  the  promise  or  contract  is  made.     Thus 
the  money  paid  or  the  note  given  on  a  sale  of  goods  is  the 
consideration  for  the  sale,  and  the  goods  sold  are  the  con- 
sideration for  the  promise  to  pay  for  them.     But  where 
there  is  a  promise  on  one  side,  but  nothing  given,  done,  or 
promised  on  the  other,  as  an  agreement  to  make  a  present, 
it  is  not  binding.     This  subject  will  be  more  fully  treated 
in  Chapter  VI. 

7.  Fraud.  —  A  CONTRACT  WHICH   ONE  is  INDUCED  TO 

MAKE   THROUGH    FRAUD  OR  DECEIT   IS   NOT  BINDING  UPON 

HIM.  We  have  seen  that  assent  is  necessary,  but  there  can 
be  no  true  assent  unless  there  is  perfect  freedom  and  full 
knowledge  of  the  facts,  or  at  least  the  chance  to  learn 
(Chap.  VII.). 

8.  In  Writing    and   Signed.  —  Some  contracts  are  not 
binding  upon  a  person  unless  they  are  in  writing  and  signed 
by  him.     The  classes  which  require  this  will  form  the  sub- 
ject of  Chapter  VIII.     Not  all  contracts  need  to  be  written. 
The  majority,  perhaps,  in  commercial  life  may  be  oral. 
The  reason  for  requiring  a  writing  in  any  case  is  to  avoid 
any  uncertainty,  and  the  contracts  requiring  it  belong  to 


Contracts.  28 


one  of  these  classes:  (1)  where  the  effect  of  any  mistake 
would  be  particularly  serious,  because  of  the  amount  in- 
volved, and  (2)  where  mistake  or  fraud  might  be  easily 
committed. 

9.  Performance  by  One.— But  even  though  a  contract  has 
all  the  requisites,  it  is  not  binding  on  one  party  if  the  other 
neglects  to  perform  his  part.  ONE  HAS  NO  RIGHT  TO  SUE 

ON  A  CONTRACT   UNLESS   HE   HAS   PERFORMED  OR  OFFERED 

TO  PERFORM  HIS  PART.  Thus  if  I  hire  you  to  work  for 
me,  you  must  do  all  you  agreed  to  before  you  have  any 
claim  on  me.  We  will  find  illustrations  of  this  principle 
in  all  parts  of  the  book. 


REQUISITES  or  A  BINDING  AGREEMENT. 

I.    THOSE  RELATING  TO  ITS  NATURE : 

(  1.  It  must  be  POSSIBLE, 
<  2.  It  must  be  LEGAT,. 
II.    THOSE  EELATING  TO  OUTSIDE  CIRCUMSTANCES  : 

'  1.  It  must  be  made  by  one  ABLE  TO  CONTRACT; 

2.  It  must  be  ASSENTED  to ; 

3.  It  must  have  a  CONSIDERATION; 

4.  There  must  be  NO  FRAUD; 

5.  In  certain  cases  it  must  be  WRITTEN  AND  SIGNED. 


24  General  Principles. 


CHAPTEE  III. 

ILLEGAL    CONTRACTS. 

1.  By  Illegal  Contract  we  here  mean  one  which,  on  ac- 
count of  its  nature,  the  law  forbids  any  one  to  make.    Such 
a  contract  is  wholly  void.     Any  agreement  to  commit  any 
illegal  act  is  itself  illegal.     ANY  CONTRACT  WHICH  HAS  FOE 

ITS  PLTEPOSE  THE  FURTHERANCE  OF  ANY  OBJECT  CONTRARY 
TO  JUSTICE  OR  COMMON  MORALITY  IS  VOID.  TllUS  any 

betting,  gambling,  or  bribery  agreement  is  void.  It  would 
be  impossible  to  give  a  complete  list  of  illegal  contracts, 
and  therefore  we  will  merely  state  in  the  following  sections 
some  of  those  which  are  more  commonly  met  with  in  com- 
mercial life. 

2.  Why  Void. — The  reason  for  the  other  six  requisites 
of  a  binding  agreement  is  private,  (i.e.  concerns  only  the 
particular  parties  to  the  contract,)  viz.,  to  save  the  other 
party  from  unjust  loss;  but  with  regard  to  the  remaining 
requisite,  legality,  the  reason  is  public,  (i.e.  concerns  the 
public,)  viz.,  because   illegal  contracts  are   considered  as 
hurtful  to  the  whole  public.     This  will  be  seen  as  we  ex- 
amine each  case.     For  this  reason  neither  of  the  parties 
can  enforce  an  illegal   contract.      The  law  considers  it 
wholly  vicious,  and  will  help  neither  party,  even  though 
he  has  performed  his  part,  or  paid  money. 

3.  Usury. — In  most  of  the  States  it  is  illegal  to  agree  to 
pay  or  take  more  than  a  certain  rate  of  interest,  and  in 
those  States  no  such  agreement  can  be  enforced;  i.e.,  a 
borrower  cannot  be  compelled  to  pay  more  than  a  certain 
rate,  even  though  he  promises  it.*     This  rate  is  different 

*  Usury  is  that  part  of  the  interest  agreed  to  be  paid  for  a  loan  of 
money  which  exceeds  the  rate  allowed  by  law.     Thus  if  the  highest 


Contracts.  26 

in  different  States.  The  theory  with  regard  to  usury  has 
been  that  it  injured  the  community  as  a  whole.  We  shall 
examine  this  subject  more  fully  in  Chapter  XXXIV. 

4.  Against  the  Revenue  Laws. — Revenue  laws  are  laws 
laying  taxes  and  duties  to  raise  money  for  the  support  of 
the  government.     Manufacturers  of  certain  articles  are  re- 
quired to  pay  the  government  a  certain  amount  for  all  they 
make;  importers  are  required  to  pay  also  when  they  im- 
port certain  articles.     It  is  illegal  to  make  or  import  these 
taxed  articles  without  paying  the  duties.     Therefore  any 
agreement  the  object  of  which  is  to  violate  the  revenue 
laws  is  void.     Such  are  agreements  to  smuggle,  or  to  make 
or  sell  any  dutiable  articles  without  paying  the  duty,  or 
any  agreements  aiding  in  such  a  purpose.     If  duties  are 
not  paid  it  is  a  loss  to  the  country  as  a  whole.     Contracts 
made  in  this  country  to  violate  the  revenue  laws  of  a  foreign 
country  are  not  illegal. 

5.  Giving  up  a  Trade. — An  agreement  not  to  carry  on 
anywhere  a  certain  trade,  business,  or  profession  is  illegal 
and  void.     The  reason  stated  is  that  it  is  not  considered 
best  for  the  community  that  any  one  should  wholly  give  up 
his  trade.     But  this  rule  applies  only  to  a  general  surren- 
der; i.e.,  an  agreement  not  to  carry  it  on  anywhere.     An 
agreement  by  which  one  agrees  not  to  exercise  his  calling 
within  certain  limits,  as  when  one  sells  his  business  to 
another  and  agrees  not  to  pursue  the  same  business  within 
a  mile  of  that  place,  or  within  the  same  city,  is  not  illegal. 

6.  Made  on  Sunday. — In  many  of  the  States  a  contract 
made  on  Sunday,  or  an  agreement  to  do  anything  on  Sun- 
day, except  such  as  relate  to  works  of  necessity  and  mercy, 
is  illegal  and  void.     But  the  rule  on  this  subject  differs  in 

rate  allowed  is  ten  per  cent,  and  one  agrees  to  give  twelve,  two  per 
cent  is  usury. 


26  General  Principles. 

the  different  States.     The  object  is,  for  the  good  of  all,  to 
preserve  the  religious  character  of  the  day. 

7.  War. — Usually  contracts  made  with  foreigners  are  as 
binding  as  any  others.     But  when  two  nations  are  at  war 
all  commercial  intercourse  between  them  is  prohibited.  A 
contract  made  between  a  citizen  of  one  nation  and  a  citizen 
of  another  with  which  it  is  at  war,  is  illegal  and  void.     But 
each  can  trade  with  a  neutral  nation.     Thus  if  England 
and  the   United  States  were  at  war,  we  could  not  trade 
with  Englishmen;  but  if  England  and  France  were  at  war, 
we  could  trade  with  either. 

8.  Others. — Each  State  makes  such  contracts  illegal  as  it 
thinks  best,  and  in  every  State  there  are  some  which  have 
not  been  mentioned  here.    They  are  so  many  and  so  various 
in  the  different  States  that  it  is  impossible  to  do  more 
than  refer  to  them  here. 

9.  Illegal  Consideration. — A  contract,  the  consideration 
of  which  is  a  forbidden  act  or  promise,  is  illegal  and  void. 
An    illegal  consideration   is    no   consideration,      Thus  a 
promise  to  pay  a  bribe,  or  a  note  given  in  consideration  for  a 
person's  promising  not  to  prosecute  an  offender  fora  crime 
that  has  been  committed,*  or  a  promise  to  pay  one  creditor 
more  than  the  rest  if  he  will  consent  to  a  debtor's  discharge, 
are  wholly  illegal  and  void.     Both  sides  of  a  contract  must 
be  legal,  or  it  is  all  void. 

*  To  make  such  a  promise  is  itself  a  crime,  called  compounding  a 
felony.  Merchants  sometimes  do  this;  promising  not  to  prosecute 
thieves  if  they  will  return  stolen  property.  Such  a  promise  is  alto- 
gether illegal,  either  as  a  contract  or  as  consideration,  besides  being 
punishable  as  a  crime. 


Contracts.  <ft 

CHAPTER  IV. 

PERSONS    NOT   ABLE   TO    CONTRACT. 

1.  General  Rule. — This  has  been  stated  to  be  that  all 
natural  persons  mry  make  any  contract,  except  minors, 
lunatics  and  idiots.     Corporations,  which  are  artificial  per- 
sons, may  make  such  contracts  as  their  charters  or  the  law 
expressly  gives  them  power  to  make  (p.  72,  sec.  6). 

2.  Minors. — A  person  ceases  to  be  a  minor  and  is  of  age 
the  day  before  his  twenty-first  birthday.*     In  a  few  States 
a  female  becomes  of  age  earlier;  in  some  at  eighteen,  in 
others  when  she  marries.     The  reason  that  prior  to  that 
day  minors  can  make  no  binding  agreement  is  that  as  a 
rule  they  have  not  obtained  sufficient  knowledge  or  experi- 
ence to  enable  them  to  understand  what  agreements  will  be 
to  their  advantage  and  what  will  not.     The  law  in  this  way 
protects  them  against  those  who  would  take  advantage  of 
them.     Thus  it  will  be  seen  that  it  is  dangerous  to  make 
any  bargain  with  a  minor,  for  he  may  at  any  time  refuse  to 
carry  it  out. 

3.  Minor  may  Enforce  it. — But  if  the  minor  chooses  to 
enforce  the  contract  and  do  his  part,  he  may,  and  then  the 
other  party  will   be   bound  to  perform   his  part;  i.e.,  A 

MINOR   HAS   HIS   CHOICE,  WHICH   THE    OTHER    PARTY  MUST 
ABIDE  BY,  TO  CONSIDER   THE   CONTRACT  BINDING  OR  VOID. 

Were  this  not  so  he  would  be  unable  to  enforce  an  advan- 
tageous contract,  and  might  be  defrauded  in  that  way. 

4.  Necessaries. — There  is  one  exception  to  a  minor's  ina- 
bility to  contract.      It  is  this:   WHERE   A  MINOR  BUYS 

*  For  convenience  we  use  throughout  the  book  only  the  words 
denoting  the  masculine  gender,  but  the  law  must  be  understood  as 
j>l>yl.ying  to  the  feminine  as  well. 


28  General  Principles. 

THINGS  NECESSARY  OR  APPROPRIATE  FOR  HIM  IN  HIS 
WAY  OF  LIFE,  WHEN  THEY  ARE  NOT  SUPPLIED  BY  A 
PARENT,  THE  MINOR  IS  BOUND  TO  PAY  FOR  THEM.  Xec- 

essaries  include,  (I)  food,  (2)  clothing,  (3)  lodging,  (4) 
medicine,  and  (5)  education.  The  reason  for  this  rule  is 
the  protection  of  the  minor,  for  if  a  parent  did  not  supply 
these  things,  and  he  could  not  contract  for  them  himself, 
he  might  not  be  able  to  obtain  them  at  all,  even  though  he 
had  property.  But  even  in  buying  necessaries  the  minor 
is  not  bound  to  pay  what  he  agrees  to,  but  only  what  the 
articles  are  worth. 

5.  Ratification. — IF  AFTER  BECOMING  OF  AGE  THE  MI- 
NOR RATIFIES  A  CONTRACT  MADE  BEFORE,  IT  IS  BINDING. 

It  is  the  same  as  if  it  were  made  then.  A  ratification  may 
be  made  in  two  way*:  (1)  by  an  express  agreement  to  carry 
it  out,  or  (2)  in  many  cases  by  neglecting  to  disaffirm  the 
contract  after  he  becomes  of  age,  and  retaining  all  the 
benefit  of  it.  This  last  rule  applies  especially  to  cases  where 
a  minor  has  bought  property  during  his  minority;  if  he  re- 
tains it,  or  performs  any  act  of  ownership  over  it  after  reach- 
ing full  age,  it  will  be  a  ratification,  and  he  must  pay  for  it. 

6.  Lunatics  and  Idiots. — A  lunatic  is  one  who  has  lost 
his  reason,  an  idiot  one  who  never  had  any.     THE  CON- 
TRACTS OF  A   LUNATIC  OR  AN  IDIOT  CANNOT  BE  ENFORCED 

AGAINST  HIM;  but  the  other  party  to  the  contract  must 
fulfill  it  if  the  lunatic  chooses  to  maintain  it.  Like  the 
minor,  he  has  his  choice.  To  agree  is  an  act  of  the  mind, 
and  therefore  those  deficient  in  mind  cannot  in  reality 
agree.  But  the  real  and  practical  reason  why  a  lunatic  or 
idiot  cannot  contract,  is  the  same  as  in  the  minor's  case; 
viz.,  to  protect  him  against  designing  persons.  A  person 
wholly  intoxicated  has  lost  the  use  of  his  mind  for  the  time, 
and  therefore  the  same  rule  applies  to  him.  But  all  may 
make  binding  contracts  for  necessaries. 


Contracts,  29 

7.  Married  Women. — A  woman    having  no  husband, 
whether  unmarried  or  a  widow,  can  make  contracts  as  freely 
as  a  man.     But  with  regard  to  married  women  the  rule 
used  to  be  that  they  could  make  no  contracts  whatever. 
Now,  however,  in  most  States  a  married  woman  may,  (1) 
carry  on  a  business  apart  from  her  husband,  and  bind  her- 
self by  any  contract  connected  with  it,  or  (2)  make  any 
contract  connected  with  property  which  she  owns  separately. 
In  most  States  still  she  is  unable  to  contract  except  in  con- 
nection with  her  business  or  her  separate  property.     There 
is  too  much  diversity  to  consider  the  subject  further. 

8.  Agency. — If  a  contract  cannot  be  made  by  any  one 
personally,  it  cannot  be  made  for  him,  i.e.,  by  an  agent. 
Thus  a  minor  cannot  make  a  binding  contract  through  an 
adult  who  is  acting  for  him.    But  both  minors  and  married 
women  may  act  as  agents  for  others,  even  in  making  con- 
tracts.    Thus  if  a  wife  buys  articles  necessary  for  herself 
or  her  household,  she  may  not  be  sued  for  payment,  but 
her  husband  may  be,  for  she  has  an  implied  authority  to 
act  as  his  agent  in  making  such  contracts.     So  minors  and 
married  women  employed  as  clerks,  bind  their  employers 
by  their  acts. 


CHAPTER  V. 

ASSENT   TO   A    CONTRACT. 


1.  Meaning  of  Assent. — A  promise,  an  offer,  a  proposi- 
tion, a  discussion,  none  of  them  amount  to  a  contract  until 
all  parties  have  finally  assented  to  the  same  thing.  If  we 
analyze  any  agreement  we  find  it  consists  of  two  elements, 
(1)  an  offer  on_oneside,  and  (2)  an  acceptance  on  the  other. 


30  General  Principles. 

For,  instance,  when  a  seller  of  goods  tells  their  price  to  a 
buyer,  it  is  an  offer  to  sell  them  at  that  price,  and  the 
bargain  is  complete  when  the  buyer  says  "  I  will  take 
them."  Now  we  may  consider  three  ways  in  which  this 
offer  and  acceptance  may  be  made,  (1)  orally,  where  both 
parties  are  present,  (2)  by  letter,  where  the  parties  are  sep- 
arate, and  (3)  by  a  formal  written  document  signed  and 
delivered. 

2.  First  Case:  Orally. — In  this  case  it  is  perhaps  seldom 
that  any  formal  offer  or  acceptance  is  made.     It  makes  no 
difference  which  does  the  talking,  or  even  that  there  is 
none,  provided  an  agreement  is  reached.     If  anything  is 
said  or  done  which  indicates  that  both  parties  assent  or 
agree  to  the  same  proposition,  the  contract  is  •complete. 
That  assent  may  be  by  words,  written  or  oral,  or  acts,  or 
sometimes  (but  not  generally)  even  by  silence.     An  offer 
made  may  be  withdrawn  at  any  moment,  and  if  the  parties 
separate,  it  continues  no  longer  as  an  offer,  unless  there  is 
an  agreement  that  it  shall.     After  withdrawal  it  cannot  be 
accepted  unless  there  is  a  renewal  of  it. 

Note  to  leather. — It  would  be  a  useful  exercise  to  compose  a  num- 
ber of  hypothetical  conversations,  such  as  occur  every  day,  and 
have  the  scholar  state  whether  or  not  agreements  had  been 
reached  in  them,  and  why. 

3.  Second  Case :  By  Letter. — An  offer  made  by  letter  and 
accepted   by  letter  is   a  contract.     But  here  the  offer  re- 
mains open  for  several  days  unless  withdrawn.     The  con- 
tract is  complete  the  instant  the  letter  of  acceptance  is  put 
into  the  mail,  if  properly  directed.     It  makes  no  difference 
whether  the  letter  of  acceptance  ever  reaches  the  first  party 
or  not,  nor  that  the  latter  has  meanwhile  withdrawn  his 
offer.     The  offer  may  be  withdrawn  at  any  time  before  it 
is  accepted,  but  notice  of  the  withdrawal  must  reach  the 
other  party  before  he  has  accepted,  i.e.,  before  he  has  mailed 


Contracts.  31 


his  acceptance.*  If  goods  are  ordered  of  a  merchant  by 
letter,  it  is  an  offer  to  buy,  and  his  sending  them  is  an  ac- 
ceptance of  that  offer. 

Note  to  Teacher. — Vary  the  dates  in  the  example  given  below  and 
have  the  scholar  state  in  each  case  whether  a  contract  has  been 
made  or  not.  It  is  sometimes  a  matter  of  minutes  only.  Practi- 
cal suggestions  could  also  be  made  of  ways  to  guard  against  mis- 
takes, as,  for  instance,  asking  for  replies,  or  using  the  telegraph. 

4.  Acceptance  with  Modification. — But  very  often  when 
one  party  makes  an  offer  the  other  says  (or  writes)  that  he 
will  accept  with  certain  changes  or  on  certain  conditions. 
Such   an  acceptance  is  no  acceptance,  but  is  in  effect  a 
refusal  and  a  new  offer,  which  the  first  party  may  accept  or 
not,  and  the  contract  is  not  made  until  he  does  accept.  All 
the  foregoing  rules  apply  to  such  new  offer  and  acceptance. 
In  other  words,  an  acceptance,  to  make  a  contract,  must  be 
unconditional. 

5.  Third  Case:    Formal  Written  Contract. — A  written 
paper,  signed  by  only  one  party,  no  matter  how  formal,  is 
not  a  contract  until  it  has  been  communicated  to  the  other 
party  and  accepted  by  him.  Until  then  it  is  merely  an  offer. 
This  acceptance  usually  is  made  by  keeping  the  paper,  and 
consequently  we   may  say  that  delivery  is  necessary  to  a 
written  contract.     If  both  sign,  the  signature  of  each  indi- 
cates his  acceptance.     Usually  the  parties  agree  orally  first, 
and  a  written  agreement  is  then  drawn  up  ;  in  such  case 
the  written  agreement  entirely  supersedes  the  oral  one. 

6.  Effect  of  Mistake. — It    may  be  thought,  where  one 

*  Thus  if  A,  in  New  York  City,  on  January  2d,  wrote  a  letter  to  B, 
in  San  Francisco,  offering  to  sell  certain  goods  at  a  certain  price,  and 
B  received  it  on  the  9th,  and  mailed  an  answer  accepting  the  offer  on 
the  llth,  the  contract  would  then  be  complete,  even  though  B's  letter 
should  never  reach  A,  and  even  though  A  had  written  a  second  letter 
on  the  7th  withdrawing  tho  offer,  unless  the  letter  of  withdrawal 
reached  B  before  he  mailed  his  letter. 


32  General  Principles. 

makes  a  contract  under  some  mistake,  as  for  instance  a 
miscalculation,  or  ignorance  of  the  meaning  of  some  word, 
that  he  really  gives  no  assent.  But  the  law  does  not  allow 
for  any  mistake  of  which  the  other  party  is  ignorant. 
Every  one  must  know  at  his  peril  the  language  used,  its 
meaning,  and  its  legal  effect.  Thus  if  I,  meaning  to  order 
50  pieces  of  goods,  carelessly  say  or  write  500,  I  must  take 
the  500  if  the  seller  insists  upon  it. 

7.  Effect  of  Custom. — If  any  universal  custom  has  grown 
up  in  a  certain  business,  or  in  a  certain  class  of  transactions, 
it  forms  an  implied  part  of  every  contract.  This  is  so 
whether  the  particular  parties  know  of  it  or  not.  In  par- 
ticular trades  common  words  will  often  acquire  by  custom 
peculiar  meanings,  and  such  meanings  are  binding.  Thus, 
by  a  universal  custom,  a  note  is  not  due  until  three  days 
after  it  purports  to  be  (p.  107,  sec.  5).  But  a  custom 
to  be  binding  must  be  universal  in  the  trade.  If  it  is  only 
a  custom  of  the  par  tic  alar  party,  it  is  not  binding  on  the 
other  unless  he  knows  of  it. 


CHAPTER  VI. 

CONSIDERATION. 

1.  The  Rule,  we  have  seen,  is  that  a  promise  without  consid- 
eration is  not  binding.*  Consideration  is  something  either 

*  We  shall  consider  here  only  promises.  But  other  contracts  also 
require  a  consideration.  Thus  a  sale,  which  is  not  a  promise,  but  an 
agreement  executing  itself,  must  have  a  consideration,  viz.,  a  price. 
But  a  promise  once  executed  is  binding.  It  is  then  no  longer  a 
promise,  but  an  act.  Thus  a  promise  to  make  a  present  is  not  binding, 
but  when  made  it  can  not  be  recalled. 


Contracts.  33 


(1)  given,  (2)  done,  or  (3)  promised  to  be  given  or  done  by 
the  person  to  whom  the  promise  is  made.  Thus  suppose  A 
makes  a  promise  to  pay  B  a  sum  of  money  :  A  need  not 
fulfill  that  promise  unless  B  on  account  of  it  either  (1) 
gives  something  (which  is  a  case  of  sale),  or  (2)  does  some- 
thing (such  as  services  rendered  to  A),  or  (3)  promises  to 
give  or  do  something  in  the  future.  Thus  we  see  that  even 
where  both  sides  of  the  agreement  are  promises,  relating 
to  the  future,  each  forms  a  good  consideration  for  the 
other. 

2.  Its  Reason. — Honor  and  morality  often  require  one  to 
keep  his  promises,  though  they  are  gratuitous,  but  the  law 
cannot  go  so  far.     THE  OBJECT  OF  THE  LAW  is  TO  PREVENT 
INJURY,  not  to  make  people  faithful ;  and  a  person  is  not 
considered  as  injured  by  the  breaking  of  a  promise  made  to 
him,  unless  he  has  given,  done,  or  promised  something  to 
balance  it. 

3.  For  Whose  Benefit. — It  is  important  to  remember  that 
a  consideration  is  sufficient,  whether  it  acts  to  the  benefit 
of  the  person  promising  or  not.     If  he  requests  it,  it  is 
presumed  to  be  for  his  benefit.     It  is  sufficient  if  it  is  given 
or  done  for  him,  whether  it  is  given  or  done  to  him  or  not. 
Thus  if  A  says  to  B,  "If  you  will  furnish  C  with  books,  I 
will  pay  for  them,"  A  makes  the  promise  to  B,  but  C 
receives  the  benefit,  yet  A  must  pay.    This  rule  applies  espe- 
cially to  the  case  of  guaranty  (p.  76,  sec.   1).     The  reason 
for  it  is  that  any  one  who  acts  on  the  faith  of  a  promise 
made  to  him  would  be  injured  if  the  promise  was  not  car- 
ried out.     B  would  lose  his  books  if  A  did  not  pay  for 
them.     We  may  state  the  rule  thus  :  ANY  CONSIDERATION 

IS  SUFFICIENT  WHICH  IS  EITHER  OF  BENEFIT  TO  THE  PARTY 
PROMISING,  OR  OF  LOSS  TO  THE  OTHER. 

4.  Adequacy. — THE  VALUE  OF  THE  CONSIDERATION  is 
UNIMPORTANT.     Every  one   is   left  to   judge   for  himself 


34  General  Principles. 

whether  he  is  getting  enough  for  his  agreement.  Thus  if 
I  sell  for  $50  what  is  worth  $100,  nevertheless  I  must  abide 
by  my  bargain,  unless  I  have  been  purposely  deceived. 

5.  An  Illegal  Consideration,  we  have  seen,  is  no  considera- 
tion (p.  26).     This  means  that  when  the  thing  given,  done 
or  promised  by  one  party  is  an  unlawful  act,  the  other 
party  is  not  bound  by  his  part  of  the  contract.     The  law 
will  not  help  wrongdoers. 

6.  Exception. — There  is  one  very  important  exception  to 
the  rule  that  a  contract  must  have  a  consideration.     It  is 
the  case  of  notes,  drafts  and  other  negotiable  paper,  trans- 
ferred before  they  become  due,  to  a  party  who  has  paid  for 
them,  and  who  does  not  know  that  they  had  no  considera- 
tion in  the  beginning.* 

7.  Sealed  Instruments. — There  is  no  difference  between 
written  and  oral  contracts  as  to  the  necessity  for  a  con- 
sideration.    In  some  States,  however,  if  a  seal  is  affixed  to 
a  written  contract,  it  requires  no  consideration. 


CHAPTER  VII. 

FRAUD    AND    DECEIT. 

1.  Two  Kinds. — Fraud  may  enter  into  a  contract  in  two 
ways  ;  (1)  it  may  be  fraud  practiced  by  one  party  upon  the 
other  to  induce  him  to  make  the  contract,  or  (2)  the  con- 
tract may  be  a  fraudulent  device  between  the  two  to  cheat 
some  third  party. 

*  This  may  not  be  understood  at  this  point.  It  will  be  fully  ex- 
plained later.  Reference  should  be  made  to  the  following  sections 
Chap.  XXII.,  pec.  7-12,  and  Chap.  XXIII.,  sec.  15. 


Contracts.  35 


a.     Fraud  Between  the  Parties. 

2.  What  it  is. — As  we  have  seen,  ONE  DEFRAUDED  IN  THE 

MAKING  OF  A  CONTRACT  NEED  NOT  CARRY  IT  OUT.       Fraud, 

as  we  here  use  it,  is  deceit.  It  may  be  practiced  in  two  ways, 
(1)  by  stating  facts  known  to  be  false,  and  (2)  by  conceal- 
ing facts  known  to  be  true,  and  which  ought  to  be  revealed. 
The  former  is  the  more  frequent  case.  Thus,  if  one  buys 
goods,  representing  that  he  is  able  to  pay  for  them,  while 
he  is  not,  the  seller  may  treat  the  sale  as  void  and  keep  or 
recover  the  goods  ;  in  insurance,  any  concealment  of  a  ma- 
terial fact  would  make  the  contract  void  (p.  178).  It  is 
impossible  to  define  fraud  exactly. 

3.  The   Effect. — THE  DISHONEST   PARTY   MUST  CARRY 

OUT  HIS  CONTRACT,  IF  THE  OTHER  PARTY  WISHES  TO  TREAT 

IT  AS  VALID..  In  other  words,  like  the  case  of  a  minor, 
(p.  27),  the  defrauded  party  has  his  choice  to  consider  it 
all  valid  or  all  \oid.  Thus,  in  a  sale  through  fraud,  the 
seller  may  at  his  option  consider  it  void  and  recover  the 
goods,  or  he  may  consider  it  valid  and  claim  the  price. 
Any  different  rule  from  this  would  allow  a  dishonest  person 
to  take  advantage  of  his  own  dishonesty  in  a  case  where  he 
had  made  some  mistake  as  to  its  advantage  to  himself. 

b.  Fraud  on  Third  Party. 

4.  By  Illegal  Means. — An  agreement  between  two  par- 
ties to  cheat  a  third  is  an  illegal  agreement  and  wholly  void, 
besides  being  often  a  criminal  offense. 

5.  By  Legal  Means. — But  an  act  entirely  legal  in  itself 
may  often  work  as  a  fraud  upon  other  parties.     The  most 
common  example  of  this  is  where  a  failing  debtor  transfers 
his  remaining  property  so  that  his  creditors  shall  not  get  it, 
but  in  such  a  way  that  he  retains  the  benefit  of  it  himself, 
as  where  he  gives  it  to  his  wife.     It  is  a  legal  act  in  itself, 
fraudulent  only  as  to  creditors,  and  as  to  them,  only  when 


36  General  Principles, 

he  does  not  retain  sufficient  property  to  pay  his  debts.  The 
rule  therefore  is  this:  such  a  transfer  is  binding  upon  the 
two  parties,  but,  if  done  to  defraud  creditors,  any  creditor 
may  sue  to  have  it  declared  void. 


CHAPTER  VIII. 

WRITTEN   CONTRACTS. 

1.  When  Necessary. — Any  agreement  may  be  put  in  a 
written  form,  and  this  is  always  prudent,  for  it  saves  all 
uncertainty  as  to  what  the  agreement  was.     When  written, 
no  other  evidence  of  what  the  party  agreed  to  can  be  given. 
But,  as  before  stated,  some  contracts  to  be  binding  must 
be  in  writing  and  signed.     The  chief  classes,  having  refer- 
ence to  commercial  transactions,  are  three  in  number,  (1) 
agreements  for  the  sale  of  personal  property  *  over  a  certain 
amount  in  value,  (2)    agreements    of    guaranty,   and  (3) 
agreements  not  to  be  performed  within  a  year. 

a.   Classes  requiring  writing. 

2.  Sale. — A  SALE  OF  PERSONAL  PROPERTY,  OR  AN  AGREE- 
MENT TO  BUY    OR   SELL,  IF   OVER   A    CERTAIN    AMOUNT   IN 

PRICE,  MUST  BE  IN  WRITING  AND  SIGNED,  unless  some  part 
has  been  delivered  or  paid  for.  The  amount  under  which 
the  contract  may  be  oral,  is  not  the  same  in  all  the  States, 

*  Real  estate  means  land  and  buildings-  Personal  property  means 
all  other  kinds  of  property,  and  hence  includes  all  merchandise.  All 
contracts  for  the  sale  of  real  estate  must  also  be  in  writing,  but  we 
will  not  consider  them,  because  they  hardly  fall  within  the  scope  of 
a  book  on  commercial  law. 


Contracts.  37 


varying  from  $30  to  $200.  •  Thus,  if  I  orally  order  $300 
worth  of  goods  from  you,  I  may  refuse  to  take  them  when 
you  send  them.  But  oral  orders  of  that  kind  are  contin- 
ually acted  upon  in  business,  and  are  binding  contracts. 
The  reason  is  that  they  are  made  effectual  by  either  deliv- 
ery of  the  goods  or  payment.  These  we  will  now  consider. 

3.  Delivery. — IF  ANY  PAET  OF  THE  GOODS  ARE  DELIV- 
ERED   TO    THE    PURCHASER    AND    ACCEPTED    BY    HIM    THE 

WHOLE  CONTRACT  is  BINDING,  though  not  written,  i.e.,  the 
seller  must  deliver  all,  and  the  buyer  must  pay  for  all. 
Thus,  in  the  last  example,  if  I  orally  order  goods,  I  need 
not  receive  them,  but  if  I  do  receive  them,  or  any  part  of 
them,  I  must  pay  the  agreed  price  and  take  them  all. 

4.  Payment. — IF  ANY  PART  OF  THE  PRICE  is  PAID  AND 

RECEIVED,    THE    WHOLE    CONTRACT  IS    BINDING,  though  it 

was  not  written,  nor  any  part  of  the  goods  delivered.  We 
may  express  the  rules  contained  in  these  last  three  sections 
thus:  over  a  certain  amount  a  sale  or  an  agreement  to  buy  or 
sell  to  be  binding  must  have  one  of  these  three  elements: 
(1)  a  written  contract,  or  (2)  delivery  of  whole  or  part  of 
the  property,  or  (3)  payment  of  the  whole  or  part  of  the 
price.  But  if  the  goods  are  under  that  amount  in  price, 
then  no  one  of  these  things  is  necessary  (Chap.  XVIII. ). 

5.  A  Guaranty  MUST  BE  IN  WRITING.     A  guaranty  is  an 
agreement  by  one  with  another  that  a  third  person  shall 
duly  fulfill  some  engagement.     Thus,  where  A  agrees  to 
pay  the  debt  of  B,  A  is  said  to  guarantee  the  debt.     So 
where  one  agrees  to  indemnify  an  employer  foi  any  loss  he 
may  suffer  through  a  certain  clerk,  he  is  said  to  guarantee 
the  faithfulness  of  the  clerk  (Chap.  XVI.). 

6.  A  Contract  which  cannot  be  performed  within  a  year 
MUST  BE  IN  WRITING.     This  means  a  year  from  the  time  it 
is  made.     Thus  an  agreement  to  do  any  act  eighteen  months 
from  the  time  it  is  made,  or  to  do  a  thing  which  it  is  known 


38  General  Principles. 

will  take  more  than  a  year,  must  be  written.  If  on  April 
6th  I  hire  you  orally  to  work  for  me  a  year,  commencing 
May  1st,  the  agreement  is  not  binding,  but  yet,  as  we  shall 
see,  if  you  do  work  I  must  pay  (sec.  8). 

b.    What  writing  sufficient. 

7.  The  Form  of  the  writing  is  immaterial.     It  may  be 
full  and  formal,  or  simply  a  note  or  memorandum  embody- 
ing its  substance.     It  may  be  in  ink  or  pencil.     It  must  be 
signed,  but  a  signing  with  initials  is  sufficient.     The  fact 
that  there  is  an  authenticated  written  paper  is  the  impor- 
tant thing,  not  the  form  of  it. 

8.  If  only  one  party  signs  he  is  bound  by  the  contract, 
but  the  other  one  is  not.     Thus,  if  A  signs  a  written  con- 
tract to  buy  $500  worth  of  grain  from  B,  but  B  does  not 
sign  it,  B  has  his  choice  to  complete  the  sale  or  to  refuse. 
But  where  an  agreement  has  been  performed  entirely  on 
one  side,  and  nothing  remains  to  be  done  but  for  the  other 
side  to  pay,  payment  may  be  enforced,  though  the  one  to 
make  the  payment  did  not  sign,  or  even  though  none  of 
the  contract  was  in  writing.     If  this  were  not  so  fraud 
might  easily  be  perpetrated,  for  it  is  quite  common  where 
one  party  merely  agrees  to  pay,  for  him  not  to  sign. 

9.  Signature  by  Agent. — It  is  of  course  of  no  importance 
who  writes  the  body  of  the  contract.     Nor  is  it  always 
necessary  that  the  party  himself  should  sign  it.     Any  one 
whom  he  authorizes  to  make  the  contract  for  him,  as  his 
agent,  may  sign  it  for  him,  and  may  sign  either  his  own 
name  or  that  of  his  principal.*     The  authority  to  sign  may 
be  given  to  the  agent  orally.     The  case  of  a  sale  by  a  broker 
illustrates  the  principles  of  this  section.     (See  p.  99,  foot- 
note, also  forms  on  p.  287.)     The  broker  signs  for  both  the 


*  See  p.  48,  for  definition  of  principal  and  agent. 


Contracts.  39 


seller  and  the  purchaser,  and  signs  his  own  name,  but  that 
is  sufficient  to  make  a  written  contract. 

10.  Letters. — We  have  seen  that  the  writing  need  not  be 
formal.  Where  a  letter  is  sent  containing  an  offer,  and  it 
is  accepted  by  another  letter,  the  contract  is  written,  and 
consists  of  the  two  letters  taken  together.  If  an  order  for 
goods  is  sent  by  mail,  and  acted  upon,  it  is  a  written  con- 
tract, so  far  as  the  writer  is  concerned,  but  not  as  to  the 
other  party.  A  telegram,  in  the  same  way,  may  be  a  writ- 
ten contract. 

Note  to  Teacher. — The  reason  for  any  rule  of  law  is  important,  as 
showing  its  substantial  justice,  and  thus  impressing  it  upon  the 
mind.  The  whole  subject  of  the  requisites  of  binding  agree- 
ments might  be  usefully  reviewed  by  preparing  a  number  of 
contracts  illustrating  the  different  points,  combining  two  or  more 
points  in  one  case  perhaps,  and  asking  the  scholar  for  the  ap- 
propriate rule  and  its  reason  in  each  case. 


40  General  Principles. 

COMMERCIAL  AGREEMENTS 

TO  BE  BINDING  MUST  BE 

I.  POSSIBLE  in  their  nature; 

Those  impossible  because  of 

j  1.  unforeseen  circumstances,  or 
\  2.  personal  disability, 
still  are  possible  in  their  nature. 

II.  LEGAL;  the  following  agreements  are  illegal: 

'1.  To  give  or  take  USURY  (in  many  States), 

2.  Against  the  REVENUE  LAWS, 

3.  Giving  up  a  TRADE  generally, 

4.  Made  on  SUNDAY  (in  many  States), 

5.  Between  ENEMIES  in  war, 

6.  Having  un  ILLEGAL  CONSIDERATION, 
__  7.  Some  others  in  different  States. 

III.  MADE  BY  ONE  ABLE  TO  CONTRACT  ;  that  is,  not 

1.  A  MINOR, 

2.  A  LUNATIC  or  IDIOT,  or 

3.  A  MARRIED  WOMAN, 

except  in  connection  with 


(  1.  her  separate  business,  or 
(2.  her 


her  separate  property. 

IV.  ASSENTED  TO  ;  by 

j  1.  Appropriate  words,  written  or  oral,  or 
(  2.  Acts  signifying  assent,  and  communicated  to 
the  other  party. 

V.  MADE  FOR  SOME  CONSIDERATION  ;  which  must  be  some- 

thing 

1.  GIVEN,      ) 

2.  DONE,  or  >•  by  the  other  party. 

3.  PROMISED  ) 

VI.  MADE  WITHOUT  FRAUD  OR  DECEIT; 

VII.  IN  WRITING  AND  SIGNED,  when  they  are  either 

'  1.  A  SALE  of  goods  over  a  certain  amount,  unless 
T  1.  Part  have  been  delivered,  or 
|  2.  Part  of  price  has  been  paid. 

2.  A  GUARANTY,  Of 

k8.  Not  to  be  performed  in  a  YEAR. 


Contracts.  41 


CHAPTEK  IX. 

REMEDIES   FOR   BREACH  OF  CONTRACT. 

1.  Right :  Remedy. — One  has  the  right  to  have  all  con- 
tracts made  with  him  fulfilled.     But  a  right  is  almost  use- 
less without  some  means  of  enforcing  it.     Those  means  are 
called  remedies.     It  is  for  this  purpose,  i.e.  to  apply  the 
appropriate  remedies  to   particular  cases,  that  courts  are 
established. 

2.  Kinds  of  Remedy. — When  one  does  an  illegal  act,  an 
act  forbidden  any  one  to  do,  such  as  to  steal,  he  offends 
against  the  State,  and  the  State  punishes  him,  by  imprison- 
ment or  fine.     This  is  a  criminal  remedy.     A  civil  remedy 
is  one  given  to  a  party  to  whom  a  wrong  has  been  done,  to 
compensate  him.    We  shall  treat  here  only  of  civil  remedies, 
for  to  break  a  contract  is  not  a  criminal  offense.     Civil 
remedies  are  of  two  kinds,  compensatory  and  preventive. 

3.  Compensatory. — This  consists  of  an   award  by  the 
court  of  money  (called  damages),  to  be  paid  to  the  injured 
party  by  the  other.     The  amount  is  to  be  sufficient  to  com- 
pensate him  for  his  loss.     In  mercantile  contracts  this  loss 
is  generally  easily  calculated.     Thus  the  loss  to  a  seller  of 
goods  is  the  price  the  buyer  agreed  to  pay,  or  to  the  holder 
of  an  unpaid  note,  the  amount  of  the  note.     But  quite 
often,  the  loss  is  more  difficult  to  compute,  as  where  one 
agrees  to  go  into  partnership  with  another,  but  afterward 
refuses  to.     Yet  in  every  case  the  award  of  the  court  (called 
a,  judgment)  must  be  for  the  loss  occasioned. 

4.  Execution. — If  the  debtor  fails  to  pay  the  judgment, 
the  court  may  issue  what  is  called  an  execution,  and  under 
it  his  property  may  be  taken  away  from  him  and  applied  to 
pay  the  judgment.     In  some  cases,  involving  fraud  and 


42  General  Principles. 

dishonesty,  the  party  may  be  imprisoned  for  a  time,  or 
until  he  pays  the  judgment. 

5.  Preventive. — But  there  are  cases  in  which  the  allow- 
ance of  damages  for  the  injury  already  done  would  be  only 
a  partial  remedy.     This  would  be  the  case  in  all  continuing 
contracts,  such  as  an  agreement  never  to  carry  on  a  partic- 
ular business  at  a  certain  place.    The  most  complete  remedy 
is  to  compel  the  party  to  carry  out  his  contract,  and  this 
remedy  is  sometimes  allowed.     Thus,  in  the  last  example, 
the  court,  besides  granting  damages,  will  order  the  person 
not  to  carry  on  the  business.     That  remedy  is  called  an 
injunction.     So  sometimes,  where  the  agreement  is  affirma- 
tive, the  court  affirmatively  orders  the  thing  to  be  done. 

6.  When  Allowed. — The   compensatory  remedy  applies 
to  all  cases.     When  a  contract  is  broken,  the  injured  party 
may  always  sue  for  damages.     The  preventive  remedy  ap- 
plies to  but  few  cases  in  commercial  law.     In  the  ordinary 
contracts,  such  as  notes,  drafts,  sales,  etc.,  damages  only 
can  be  obtained. 

7.  Insufficiency    of  Remedy. — Both  these  remedies  are 
often  insufficient  to  repair  the  loss.     But  the  law  can  go 
no  further.     If  a  judgment  for  damages  is  obtained,  yet 
the  debtor  may  have  no  property,  and  it  cannot  be  collected. 
"Where  an  injunction  or  other  order  is  obtained  the  party 
may  perhaps  refuse  to  obey  it.     He  will  then  be  punished 
and  imprisoned,  but  perhaps  he  will  still  refuse.     Thus, 
we  see,  law  and  remedy  cannot  fully  protect  one,  yet  they 
do  far  more  than  many  think.     Without  them  there  would 
be  practically  little  reason  for  any  one  to  respect  the  rights 
of  any  other.     It  must  be  remembered  that  the  vast  major- 
ity of  contracts  are  kept,  not  broken,  and  if  we  ask  the 
reason  why,  the  existence  of  law  and  remedy  is  at  least  a 
large  part  of  the  answer.     They  hinder  many  breaches  that 
they  could  not  repair. 


Contracts.  43 


SUMMARY  OF  LEADING  RULES  OF  CONTRACTS. 


I.  THE  FUNDAMENTAL  BULB. 
Every  one  must  fulfill  EVERY  AGREEMENT  he  makes. 

II.  EXCEPTIONS  TO  IT. 

1.  A  contract  to  do  a  thing  IMPOSSIBLE  in  its  nature  is 
void. 

2.  A  contract  the  LAW  FORBIDS  is  void. 

3.  A  contract  made  by  a  MINOR,  a  lunatic,  or  an  idiot  is 
not  binding  upon  him. 

4.  A  proposition  NOT  ASSENTED  TO  by  both  parties  is  not 
binding. 

5.  A  promise  WITHOUT  CONSIDERATION  is  not  binding. 

6.  A  contract  which  one  is  induced  to  make  through 
FRAUD  or  deceit  is  not  binding  upon  him. 

7.  Some  contracts  must  be  WRITTEN. 

8.  One  has  no  right  to  sue  on  a  contract  unless  he  has 
PERFORMED  or  offered  to  perform  his  part. 

III.  ILLEGAL  CONTRACTS. 

Any  contract  which  has  for  its  purpose  the  furtherance 
of  any  object  CONTRARY  TO  JUSTICE  or  common  morality  is 
void. 


44  General  Principles. 

IV.  PERSONS  NOT  ABLE  TO  CONTRACT. 

1.  A  minor  has  HIS  CHOICE,  which  the  other  party  must 
abide  by,  to  consider  the  contract  binding  or  void. 

2.  Where  a  minor  buys  things  NECESSARY  or  appropriate 
for  him  in  his  way  of  life,  when  they  are  not  supplied  by 
a  parent,  the  minor  is  bound  to  pay  for  them. 

3.  If  after  becoming  of  age  the  minor  RATIFIES  a  con- 
tract made  before,  it  is  binding. 

4.  The  contracts  of  a  LUNATIC  or  an  idiot  cannot  be  en- 
forced against  him. 


V.  CONSIDERATION. 

1.  The  object  of  the  law  is  to  PREVENT  INJURY. 

2.  Any  consideration   is   sufficient  which   is  either  of 
BENEFIT  to  the  party  promising,  OR  of  LOSS  to  the  other. 

3.  The  VALUE  of  the  consideration  is  unimportant. 


VI.  FRAUD  AND  DECEIT. 

1.  ONE  DEFRAUDED  in  the  making  of  a  contract  need 
not  carry  it  out. 

2.  The  DISHONEST  PARTY  must  carry  out  his  contract, 
if  the  other  party  wishes  to  treat  it  as  valid. 


VII.  WRITTEN  CONTRACTS. 

1.  A  SALE  OF  PERSONAL  PROPERTY  or  an  agreement  to 
buy  or  sell,  if  over  a  certain  amount  in  price,  must  be  in 
writing  and  signed. 

2.  If  any  part  of  the  goods  are  DELIVERED  to  the  pur- 


Contracts.  45 


chaser  and  accepted  by  him  the  whole  contract  is  binding 
without  writing. 

3.  If  any  part  of  the  price  is  PAID  and  received  the  whole 
contract  is  binding  without  writing. 

4.  A  GUARANTY  must  be  in  writing. 

5.  A  contract  which  cannot  be  performed  within  a  YEAK 
must  be  in  writing. 


REVIEW  QUESTIONS. 

Introduction. 

1.  What  is  law?    Why  is  it  necessary?     Do  all  nations  have  laws? 

2.  Do  the  laws  of  one  country  have  any  effect  in  another?     Upon 

whom?  Do  they  have  any  effect  upon  foreigners  who  are 
traveling  in  that  country?  What  force  have  the  laws  of  one 
State  in  another? 

3.  Name  the  five  sources  of  law  in  any  State,  and  their  relative 

authority.  By  which  one  of  these  are  ordinary  commercial 
transactions  mostly  governed? 

4.  Is  commercial  law  uniform  throughout  the  U.  S.  ?     Why? 

5.  What  effect  has  ignorance  of  the  law  in  any  case?    Why? 

6.  State  the  several  parts  and  divisions  into  which  the  book  is 

divided,  and  the  general  subject  of  each. 

General  Principles  of  Contracts. 

7.  What  is  a  contract?    The  differences  between  a  contract  and  a 

promise? 

8.  Explain  why  the  law  of  contracts  is  important. 

9.  Explain  the  difference  between   forbidding  everything  except 

what  is  allowed,  and  allowing  everything  except  what  is  for- 
bidden. Upon  which  theory  is  our  law  based?  What  principle 
flows  from  that  theory,  as  to  contracts? 

10.  What  is  the  fundamental  rule  of  contracts?    Its  reason?    Are 
there  exceptions  to  it? 


46  General  Principles. 

11.  Define  and  distinguish  written,  oral,  express,  and  implied  con- 

tracts. 

12.  When  must  gratuitous  services  be  paid  for,  and  when  not?  Why? 

13.  Name  the  seven  requisites  of  a  binding  contract.     Into  what  two 

classes  are  they  divided? 

14.  Name  the  three  kinds  of  impossibility.     In  which  is  the  contract 

binding,  and  in  which  not?    Why,  in  each  case? 

15.  Of  the  different  kinds  of  commercial  agreements,  are  the  greater 

part  legal  or  illegal  ? 

16.  Which  party  to  an  illegal  contract  may  claim  that  it  is  void? 

Why? 

17.  Name  some  kinds  of  illegal  contracts.     State  the  reason  in  each 

case. 

18.  Who  are  persons  "not  able  to  contract"?    Who  are  minors? 

19.  Is  a  minor's  contract  binding?    Why?    Is  a  promise  made  to  a 

minor  binding?     Why?    Is  a  contract  with  a  minor  illegal? 

20.  What  is  the  rule  as  to  "necessaries"?    What  are  "  necessaries"? 

21.  What  is  the  effect  of  ratification?  When  must  it  be  made?    State 

the  two  ways  in  which  it  may  be  made. 

22.  State  the  effect  of  a  lunatic's  contract. 

23.  What  contracts  can  an  unmarried  woman  make?    A  widow?    A 

married  woman? 

24.  If  an  adult  makes  a  contract  as  the  agent  of  a  minor,  is  the  minor 

bound  by  it?  If  a  minor  makes  a  contract  as  the  agent  of  an 
adult,  is  the  adult  bound  by  it? 

25.  What  will  change  an  offer  into  a  contract? 

26.  In  what  ways  may  assent  be  given? 

27.  When  may  an  offer  be  withdrawn?    Can  it  be  accepted  after 

withdrawal?  Can  it  be  withdrawn  after  being  accepted?  If 
made  and  accepted  by  letter  at  what  moment  is  the  contract 
complete? 

28.  State  the  effect  of  an  unconditional  acceptance.      Of  a  con- 

ditional. 

29.  If  an  agreement  is  signed  by  one  party  is  anything  more  neces- 

sary to  make  the  contract  complete?    If  signed  by  both  parties? 

30.  Is  a  contract  binding  upon  one,  which  he  made  in  mistake? 

31.  What  effect  do  customs  in  trade  have  upon  contracts?    Why? 

32.  What  is  consideration?    Why  necessary?     State  the  difference 

between  what  the  law  demands  and  what  morality  demands 
in  this  respect. 


Contracts.  47 


83.  Must  the  consideration  be  of  benefit  to  the  party  promising? 

34.  Is  an  inadequate  consideration  sufficient?     Why? 

35.  Is  an  illegal  promise  a  good  consideration  for  a  legal  promise? 

Why? 

36.  What  commercial  contracts  require  no  consideration,  and  when? 

37.  Does  a  written  contract  require  a  consideration? 

38.  State  the  two  ways  in  which  a  contract  may  be  fraudulent? 

39.  What  is  the  effect  of  a  contract  by  two  parties,  where  one  prac- 

tices fraud  upon  the  other?  What  may  the  defrauded  party 
do?  State  the  two  ways  of  practicing  fraud. 

40.  If  a  man  transfers  his  property  to  his  wife  to  keep  it  out  of  the 

hands  of  his  creditors,  may  the  creditors  claim  that  it  is  still 
his,  and  that  the  transfer  is  void?  If  they  do  not,  may  any 
one  else?  If  they  do  not,  to  whom  will  the  property  belong, 
to  the  wife  or  the  husband? 

41.  Why  does  the  law  require  some  contracts  to  be  in  writing?   Slate 

two  reasons. 

42.  Name  the  three  kinds  which  must  be  written. 

43.  State  the  three  cases  in  which  an  oral  sale  of  goods  is  binding. 

44.  Is  an  unsigned  paper  a  written  contract?    Is  it,  when  signed  in 

pencil?     With  initials  only?     When  signed  by  an  agent? 

45.  When  only  one  party  signs  a  contract,  which  must  be  written, 

is  he  bound  to  fulfill  it?    Is  the  other  party? 

46.  State  how  a  letter  may  become  a  written  contract. 

47.  When  one  party  fails  to  perform  his  part  of  a  contract  is  the 

other  released  ? 

48.  What   is  a  remedy?     A  civil  remedy?     A  criminal  remedy? 

Name  and  describe  the  two  kinds  of  civil  remedy.  What  are 
damages? 

49.  How  is  payment  of  a  judgment  for  money  enforced? 

50.  What  is  an  injunction? 

51.  What  kind  of  remedy  is  usually  the  only  one  applicable  to  breaches 

of  commercial  contracts? 


DIVISION  II. 


AGENCY. 


CHAPTER  X. 

AGENCY     IN     GENERAL. 

1.  Definition. — An  agent  is  a  person  authorized  to  act  for 
another  with  third  parties.     The  principal  is  the  one  for 
whom  he  acts.     The  principal  is  in  law  the  one  who  does 
the  act;   the  agent  is  only  the  instrument  or  means  by 
which  he  does  it.     The  greatest  importance  here  of  the  law 
of  agency  is  in  its  relation  to  the  making  of   contracts 
through  agents.     Thus,  every  sale  made  by  a  clerk  in  a 
store  is  a  contract  made  by  the  proprietor. 

2.  Importance  of  Subject. — Agency  is  one  of  the  most 
common  and  necessary  relations  of  life,  and  it  exists  with 
regard  to  all  kinds  of  subjects,  commercial  and  otherwise. 
Nearly  every  one  acts  every  day  as  the  agent  of  some  one 
else.     Thus,  every  clerk  in  a  store  is  the  agent  of  the  pro- 
prietor in  everything  that  he  does  connected  with  the  busi- 
ness.    Almost  all  the  business  of  brokers,  commission  mer- 
chants, lawyers,  auctioneers,  masters  of  ships,  and  many 
others,  is  some  sort  of  agency.     Corporations  act  wholly 
by  means  of  agents;  viz.,  their  officers,  clerks,  etc.     There- 
fore agency  is  one  of  the  most  important  subjects  in  the  law. 

Note  to  Teacher. — A  graphic  picture  could  easily  be  drawn  of  the 
result  to  commerce  and  civilization  were  agency  totally  abol- 
ished, and  every  one  did  for  himself  all  that  he  wished  done. 


Agency.  49 

3.  Classification. — In  every  act  done  by  an  agent  there 
are  three  persons  involved:  (1)  the  principal,  (2)  the  agent, 
(3)  the  third  party,  i.e.,  the  person  with  whom  the  agent 
acts,  or  who  is  affected  by  the  act.     Thus,  where  goods  are 
sold  in  a  store,  the  proprietor  is  the  principal,  the  salesman 
the  agent,  and  the  buyer  the  third  party.     Therefore  three 
classes  of  relations  arise:  the  relations  (1)  of  the  principal 
and  the  agent  to  each  other,  (2)  of  the  principal  and  the 
third  party  to  each  other,  and  (3)  of  the  agent  and  the 
third  party  to  each  other.     The  first  relation  does  not  prop- 
erly belong  to  the  subject  of  agency,  but  is  mentioned  for 
the  sake  of  fullness.     Each  one  of  these  parties  owes  duties 
to  each  of  the  others,  and  therefore  there  arise  six  classes  of 
duties.    In  the  next  chapter  we  shall  treat  of  the  duties  of  the 
principal  and  in  the  following  one  of  the  duties  of  the  agent. 

Note  to  Teacher. — Ask  what  the  six  classes  are.  At  the  end  of  the 
subject  of  agency,  it  might  be  presented  in  a  different  light  by 
taking  up  each  one  of  those  six  classes  and  summarizing  the 
several  duties  falling  under  them  respectively.  Thus,  the  duties 
of  the  principal  to  the  agent  are  to  pay  him  and  do  all  that  he 
has  agreed  with  the  agent  to  do;  of  the  principal  to  the  third 
party,  to  assume  the  responsibility  for  all  the  agent's  authorized 
acts,  etc.,  etc. 

4.  Who  May  Be. — (1)  Who  may  be  principal.     Any  one 
may  do  any  act  by  an  agent  which  he  may  do  personally, 
but  no  other.     This  is  why  a  minor,  lunatic,  or  idiot  can- 
not make  a  contract  through  an  agent.     (2)  Who  may  be 
agent.     Any  one  having  sufficient  understanding  to  do  as 
he  is  directed  may  be  an  agent.     Therefore  minors  and 
married  women  may  act  as  agents,  though  lunatics  and 
idiots  cannot  (p.  29). 

5.  How   Appointed. — In    ordinary   commercial    matters 
agents  may  be  appointed  orally,  and  no  particular  form  of 
words  is  necessary.     Thus,  if  an  employer  tells  his  clerk  to 
do  a  certain  thing  that  makes  the  clerk  his  agent  for  that 


50  General  Principles. 

purpose.  In  important  matters,  the  agent  is  often  ap- 
pointed by  a  written  instrument,  which  is  called  a  potver 
of  attorney  (form  31). 

6.  Extent  of  Authority. — The  employing  of  an  agent  is 
the  act  which  gives  him  his  authority.     AN  AGENT  HAS 

AUTHORITY  TO  DO  WHATEVER  IS  NECESSARY  OR  GEN- 
ERALLY DONE  IN  CONNECTION  WITH  THE  PURPOSES  FOR 

WHICH  HE  is  EMPLOYED.  Some  employments  give  very  wide 
powers,  and  leave  very  much  to  the  discretion  of  the  agent; 
others  give  a  very  limited  authority.  Thus,  any  act  of  the 
president  or  cashier  of  a  bank  in  connection  with  the  bank- 
ing business  binds  the  bank.  On  the  other  hand,  a  mes- 
senger would  have  authority  simply  to  carry  messages. 
So,  also,  if  one  is  employed  to  do  just  one  thing — as,  for 
instance,  to  sign  a  particular  paper — he  has  authority  to  do 
only  that  one  thing. 

7.  Revocation   of  Authority. — THE    AUTHORITY  OF  AN 

AGENT   MAY   BE   TAKEN    AWAY    AT    ANY   TIME.*      Here   W6 

must  carefully  distinguish  between  the  right  of  a  principal 
to  revoke  the  agent's  authority  as  to  third  parties  and  the 
right  to  break  his  agreement  as  to  the  agent.  He  has  the 
former  right,  but  if  its  exercise  breaks  his  agreement  with 
the  agent,  he  is  responsible  to  the  agent  for  any  injury. 
Thus  if  I  hire  you  for  a  year  to  sell  goods,  and  dismiss 
you,  even  without  cause,  before  the  end  of  the  year,  that 
ends  the  agency,  and  you  can  act  for  me  no  more,  but  you 
may  sue  me  for  any  loss  it  causes  you.  The  death  or  bank- 
ruptcy of  the  principal  also  ends  the  agency. 

8.  Sub- Agents. — An  agent  may  himself  act  by  an  agent, 
the  latter  being  called  a  sub-agent.     All  the  rules  of  agency 
apply  to  the  relation  between  the  agent  and  the  sub-agent; 


*  This  is  the  general  rule,  but  there  are  exceptions  to  it  which  we 
caunot  notice  here. 


Agency.  51 

for  as  to  each  other  they  are  principal  and  agent.*  There 
are  some  cases  in  which  an  agent  must  act  personally,  but 
in  most  commercial  transactions,  where  it  is  usual  to  em- 
ploy sub-agents,  they  may  be  employed. 

Note  to  Teacher. — As  an  exercise  in  distinguishing  between  princi- 
pal and  agent  something  of  this  kind  might  be  done:  take  a 
quantity  of  cotton  as  it  grows,  trace  it  through  the  different  pro- 
cesses of  cultivation,  picking,  transportation,  manufacture,  sale, 
etc.,  and  have  the  scholar  point  out  which  ones  of  those  con- 
cerned are  principals  and  which  agents,  and  for  whom. 


CHAPTER  XI. 

RESPONSIBILITY   OF   PRINCIPAL-! 

a.  Principal's  Relation  to  Agent. 
1.  Duty  to  Agent. — As  BETWEEN  THE  PRINCIPAL  AND 

AGENT,    AGENCY    IS    WHOLLY    A    MATTER    OF    AGREEMENT. 

Therefore  the  only  duty  each  owes  to  the  other  is  to  carry 

*  Thus  suppose  A,  a  manufacturer,  sends  goods  to  B,  a  commission 
merchant,  for  sale,  and  B  having  a  branch  store  in  another  place 
under  the  charge  of  C  sends  them  to  him,  and  they  are  there  sold  by 
D,  a  clerk,  to  E;  the  sale  in  reality  is  by  A  to  E  through  the  inter- 
mediate agents  B,  C,  and  D.  D  is  the  agent  of  C;  C  is  the  principal 
of  D  and  the  agent  of  B ;  B  is  the  principal  of  C  and  the  agent  of  A. 
If  each  principal  has  given  to  his  agent  the  necessary  authority,  the 
sale  is  valid.  In  this  way  there  may  be  any  number  of  intermediate 
agents. 

f  Responsibility  means  the  state  of  being  answerable  for  an  act,  and 
being  compelled  to  bear  the  consequences  of  it.  Liability  means  about 
the  same.  Thus,  when  we  say  one  is  responsible  for  his  agent,  we 
mean  that  if  the  agent  makes  a  contract  for  him  he  must  carry  it 
out;  or,  if  the  agent's  negligence  injures  another,  he  (the  principal) 
must  pay  for  it. 


52  General  Principles. 

out  his  agreement.  In  ordinary  cases  the  chief  part  of  this 
agreement  on  the  principal's  part  is  to  pay  for  what  is 
done.  As  to  each  other  the  parties  are  not  really  principal 
and  agent.  Their  agreemeut  is  one  for  personal  services 
and  that  subject  will  be  treated  in  a  later  chapter  (Chap. 
XXVIII. ). 

b.  Principal's  Relation  to  Tliird  Party. 

2.  Responsibility  to   Third  Party. — It  is  at  this  point 
that  the  most  important  rule  of  agency  comes  in.     Ordi- 
narily a  person  can  only  be  made  to  answer  for  his  own 
acts;  but  the  theory  of  agency  is  that  the  act  of  the  agent 
is  the  act  of  the  principal.    Therefore  the  rule  is,  that  THE 

PRINCIPAL  IS    RESPONSIBLE   FOR  THE  ACTS  OF   HIS  AGENT. 

Thus  if  the  agent  makes  a  contract,  the  principal  must 
fulfill  it  or  pay  damages.  If  the  agent  uses  fraud  or  deceit, 
or  acts  negligently  in  a  matter  intrusted  to  him,  the  prin- 
cipal must  bear  the  consequences  of  it.  The  principal  is 
bound  even  though  he  was  unknown  at  the  time  the  act 
was  done,  for  it  was  done  for  his  benefit,  and  one  who  takes 
the  benefit  must  also  incur  the  responsibility.  Thus  if  I  buy 
goods  of  you,  without  saying  that  I  arn  acting  for  any  one 
else,  you  may  sue  the  person  for  whom  I  am  really  acting. 

3.  Exceeding    Authority.  —  But    IF    THE  ACT    is    NOT 

WITHIN    THE    AUTHORITY    GIVEN,   THE    PRINCIPAL   IS  NOT 

RESPONSIBLE.  The  agent  is  not  an  agent  except  to  do 
what  he  is  directed  or  allowed  to  do:  beyond  that  the  act  is 
his  personal  act.  This  rule  is  clear,  though  it  is  some- 
times difficult  to  tell  exactly  what  is  authorized  and  what 
is  not  (p.  50,  sec.  6). 

4.  Apparent  Authority. — But  sometimes  a  person  ap- 
pears to  have  authority  which  he  has  not.     The  question 
then  simply  is,  who  caused  that  appearance,  for  A  PRIN- 
CIPAL IS  RESPONSIBLE   FOR  ANY  ACT  DONE  BY  HIS   AGENT 


Agency.  63 

FOE    WHICH    HE    HAS    GIVEN    AN   APPARENT    AUTHORITY. 

An  agent's  saying  that  he  has  authority  does  not  give  it 
to  him.  But  if  the  principal  himself  has  represented  in 
any  way  that  the  agent  has  authority  to  do  a  thing,  then 
he  cannot  repudiate  it  when  done.  This  case  often  arises 
where  one  is  employed  to  perform  a  general  class  of  duties, 
but  is  privately  instructed  not  to  do  certain  things  that 
otherwise  would  fall  within  his  power.  If  the  act  falls 
within  the  general  duties,  or  the  general  scope  of  the  em- 
ployment, the  principal  is  bound  by  it.  Thus  if  a  sales- 
man in  a  store  is  instructed  not  to  sell  certain  of  the  goods, 
or  not  to  sell  to  certain  persons,  but  does,  the  sale  will  be 
binding  unless  the  purchaser  knew  of  the  instructions,  for 
making  him  a  salesman  is  a  representation  to  every  one 
that  he  has  power  to  sell  anything  in  the  store.* 

5.  Ratification. — If  a  person  ratify  an  act  done  by  one 
as  his  agent,  after  it  has  been  done,  he  is  bound  by  it 
whether  he  had  given  the  agent  any  authority  or  not. 
SUBSEQUENT  RATIFICATION  is  EQUIVALENT  TO  PRIOR 
AUTHORITY.  But  if  it  is  made  under  a  mistake  as  to  any 
of  the  circumstances,  it  is  not  binding.  Thus  suppose  A 
pretends  to  be  B's  agent  and  buys  something  for  him  prom- 
ising to  pay  $50  for  it;  if  B,  on  hearing  of  it,  ratifies  the 
act,  he  is  bound;  but  suppose  that  B  is  told  he  is  to  pay 
$45,  his  ratification  under  such  a  mistake  is  not  binding. 
Ratification  may  be  made  in  two  ways:  (1)  by  express 
words,  and  (2)  by  accepting  the  benefits  of  the  act,  as 
where  one  accepts  the  money  or  services  or  other  considera- 
tion resulting  from  the  act. 

*  Yet  an  agent  has  no  right,  as  between  himself  and  his  employer, 
to  disobey  any  instructions,  for  his  contract  is  to  obey.  Authority. 
as  used  in  agency,  means  power  to  bind  principal.  Right  is  another 
thing.  An  agent,  having  the  right  has  also  the  power,  but  he  often 
has  the  power  and  not  the  right  (p.  54,  sec.  2;  p.  64,  sec.  2). 


54  General  Principles. 


CHAPTER   XII. 

RESPONSIBILITY    OF   AGENT. 

a.  Agent's  Relation  to  Principal. 

1.  In  General. — This,  we  have  already  seen,  is  merely  a 
relation  of  contract,  and  therefore  the  agent's  duty  to  his 
principal  is  simply  to  do  what  he  has  agreed  (p.   51,  and 
Chap.  XXVIII.). 

2.  Implied  Duties. — But  we  may  notice  here  three  im- 
plied portions  of  all  such  agreements:  (1)  that  he  will  obey 
all  instructions,  (2)  that  he  will  act  skillfully  and  carefully 
in  every  respect,  and  (3)  that  he  will  not  place  himself  in 
such  a  position  that  his  own  interests  are  adverse  to  those 
of  his  principal.     Thus,  if  by  disobeying  instructions   he 
makes  any  loss,  he  is  himself  responsible  for  it,  but  if  he 
makes  any  gain  it  all  belongs  to  his  principal.     If  one  is 
employed  to  buy  goods  he  must  not  buy  of  himself,  for  his 
own  interest  is  adverse  to  his  principal's. 

b.  Agent's  Relation  to  TJiird  Party. 

3.  Responsibility  to  Third  Party. — The  principal,   we 
have  seen,  must  bear  the  responsibility  of  his  agent's  acts, 
for  they  are  in  effect  his  acts.    A  corresponding  fundamen- 
tal rule  is  this:  THE  AGENT  is  NOT  HIMSELF  RESPONSIBLE 

TO  THE  THIRD  PARTY    FOR  ACTS   HE    PERFORMS  AS   AGENT.* 

The  reason  is  that  the  third  party  acts  as  though  he  were 

*  Notice  that  we  say  ' '  responsible  to  the  third  party. "  If  any  one 
does  an  illegal  act  (e.g.,  a  crime)  he  is  responsible  to  the  people — i.e., 
he  may  be  punished  criminally  for  it,  whether  acting  for  himself  or 
another.  (See  p  41,  sec.  2.) 


Agency.  55 

dealing  directly  with  the  principal.  Thus  if  I  buy  goods 
of  you  for  some  one  else,  I  am  not  responsible  for  the  price, 
because  you  trust  only  my  principal.  But  this  rule  is  sub- 
ject to  some  important  exceptions,  which  we  will  now 
consider. 

4.  Five  Exceptions. — In  the  following  five  cases  one  act- 
ing for  another  is  himself  responsible  for  his  acts  and  on 
his  contracts:  (1)  where  he  exceeds  both  his  real  and  ap- 
parent authority,  (2)  where  he  specially  agrees  at  the  time 
to  make  himself  responsible,  (3)  where  he  professes  at  the 
time  to   be  acting  for  himself  though  really  acting  for 
another,  (4)  where,  though  professing  at  the  time  to  be 
acting  for  another,  he  does  not  disclose  who  that  other  is, 
and  (5)  where  he  acts  fraudulently. 

5.  Exceeding  Authority. — AN  AGENT  WHO  EXCEEDS  HIS 

AUTHORITY  IS  HIMSELF  RESPONSIBLE  TO  THE  THIRD  PARTY. 

The  reason  is  that  if  he  was  not  no  one  would  be,  for  we 
have  seen  that  in  such  case  the  principal  is  not  bound 
(p.  52).  This  is  so  even  though  the  agent  acts  innocently 
and  believes  he  has  the  authority,  for  he  has  better  means 
of  knowing  than  the  third  party. 

6.  Special    Agreement.  —  IF    THE    AGENT    SPECIALLY 

AGREES    AT    THE    TIME    TO    BECOME    RESPONSIBLE    TO    THE 

THIRD  PARTY,  HE  is  so.  This  is  merely  the  old  rule  that 
one  must  fulfill  his  contracts.  Thus  if  A,  as  the  agent  of 
B,  buys  goods  of  C  and  makes  himself  responsible,  both  A 
and  B  are  responsible  ;  i.e.,  B  must  pay  what  he  has 
agreed  to  through  his  agent  A,  and  A  must  carry  out  his 
contract  of  guaranty  if  it  becomes  necessary. 

7.  Concealing  Principal. — In  the  next  two  cases,  where 
the  agent  pretends  to  be  acting  for  himself,  and  where  he 
does  not  disclose  his  principal,  he  is  responsible  because  he 
is  the  one  upon  whose  credit  the  third  party  acts.  We 
may  put  these  two  cases  together  and  say,  AN  AGENT  CON- 


56  General  Principles. 

CEALING  HIS  PRINCIPAL  IS   HIMSELF  RESPONSIBLE   TO   THE 

THIRD  PARTY.  So  far  as  the  third  party  is  concerned,  he 
is  the  real  principal,  being  the  only  one  trusted.  The  real 
principal  may  be  one  whom  the  third  party  would  not  trust. 
But  when  the  real  principal  is  discovered,  he  is  also  re- 
sponsible. Commission  merchants  often  do  business  in  this 
way  (Chap.  XX.). 

8.  Fraud. — AN  AGENT  ACTING  FRAUDULENTLY  OR  DE- 
CEITFULLY IS  HIMSELF  RESPONSIBLE  TO  THE  THIRD  PARTY, 
for  a  person  cannot  relieve  himself  of  responsibility  for 
such  acts.     In  this  case,  too,  the  principal  must  also  bear 
the  consequences  of  the  fraud,  for  he  obtains  the  benefit. 
Thus  we  see  that  in  four  cases  of  the  five  both  agent  and 
principal  are  bound.     The  third  party  may  take  his  choice. 
But  who  shall  finally  bear  the  loss,  the  principal  or  the 
agent,  is  another  question,  wholly  between  them,  and  not 
one  of  agency. 

9.  Public  Agents. — Officers   under  the  National,  State, 
City,  or  other  government,  are  agents  for  the  Nation,  State, 
City,  etc.,  respectively,  and  therefore  are  called  public  agents. 
Thus  the  mayor  of  a  city  acts  not  for  himself  but  for  the 
city.     Their  acts  as  agents  are  subject  to  all  the  foregoing 
rules  of  agency.     But  there  is  one  exception,  viz.,  that 
where  a  public  agent  exceeds  his  authority  he  is  not  himself 
personally  bound.     The  reason  for  this  is,  that  the  agency 
being  public,  every  one  is  presumed  to  know  the  extent  of 
the  authority. 

c.  Responsibility  of  Third  Party. 

10.  This  would  logically  form  the  subject  of  a  new  chap- 
ter, but  as  it  is  subject  to  no  peculiar  rules,  and  we  have 
but  a  word  to  say,  we  consider  it  here.     His  duties  are  no 
different  because  he  acts  with  an  agent,  but  the  same  as  if 
he  was  acting  with  the  principal  himself,  viz.,  to  carry  out 


Agency.  81 

his  contracts  and  act  lawfully  in  every  way.  Whether  he 
is  responsible  to  the  agent  or  to  the  principal  is  simply  the 
question  whether  when  he  has  done  wrong  the  one  or  the 
other  is  the  proper  person  to  sue  him,  and  that  we  do  not 
propose  to  consider. 


58  General  Principles. 

SUMMARY  OF  LEADING  RULES  OF  AGENCY. 

I.  IN  GENERAL. 

1.  An  agent  HAS  AUTHORITY  to  do  whatever  is  necessary 
or  generally  done  in  connection  with  the  purposes  for  which 
he  is  employed. 

2.  The  authority  of  an  agent  may  be  TAKEN  AWAY  at  any 
time. 

II.  BESPONSIBILITY  OF  PRINCIPAL. 

1.  As  between  the  principal  and  agent,  agency  is  wholly 
a  matter  of  AGREEMENT. 

2.  The  principal  is  RESPONSIBLE  for  the  acts  of  his  agent. 

3.  If  the  act  is  NOT  WITHIN  THE  AUTHORITY  given  the 
principal  is  not  responsible. 

4.  A  principal  is  responsible  for   any  act   done  by  his 
agent  for  which  he  has  given  an  APPARENT  AUTHORITY. 

5.  Subsequent  RATIFICATION  is  equivalent  to  prior  au- 
thority. 

III.  EESPONSIBILITY  OF  AGENT. 

1.  The  agent  is  NOT  RESPONSIBLE  himself  to  the  third 
party  for  acts  he  performs  as  agent. 

2.  An  agent  who  EXCEEDS  his  authority  is  himself  respon- 
sible to  the  third  party. 

3.  If  the  agent  SPECIALLY  AGREES  at  the  time  to  become 
responsible  to  the  third  party  he  is  so. 

4.  An  agent  CONCEALING  his  principal  is  himself  respon- 
sible to  the  third  party. 

5.  An  agent  acting  FRAUDULENTLY  or  deceitfully  is  him- 
self responsible  to  the  third  party. 


Agency.  69 


A  PRINCIPAL  IS   RESPONSIBLE 
I.  To  AGENT, 

For  any  violation  of  their  agreement; 

II.  To  THIRD  PARTY, 

I.  If  agency  was  AVOWED  ; 

For  any  act  of  agent  in  following  cases: 

'  1.  Where  REAL  authority  was  given; 

2.  Where  APPARENT  authority  was  given;  or 

3.  Where  it  was  afterward  RA'TIFIED, 

j  1.  Expressly,  or 

I  2.  By  retaining  benefit. 

II.  If  agency  was  CONCEALED  ; 

For  any  act  of  agent  in  following  cases: 
( 1.  Where  AUTHORITY  was  given,  or 
j  2.  Where  it  was  afterward  RATIFIED, 

<  1.  Expressly,  or 

|  2.  By  retaining  benefit. 

AN  AGENT  IS  RESPONSIBLE 
I.  To  PRINCIPAL, 

For  any  violation  of  their  agreement,  or  for 

1.  DISOBEDIENCE  to  instructions, 

2.  Want  of  SKILL  or  CARE,  or 

3.  Making  his  own  interests  ADVERSE. 

II.  To  THIRD  PARTY,  in  the  following  cases: 

fl.  Where  he  EXCEEDS  the  authority, 

2.  Where  he  SPECIALLY  AGREES  to  be, 
I  3.  Where  he  CONCEALS  principal,  either  by 


(  1.  Pretending  to  be  principal,  or 
(  2.  Not  disclosing  principal. 
[4.  Where  he  acts  FRAUDULENTLY. 


RESPONSIBILITY  TO  THIRD  PARTY. 

1.  Where  agent  acts  as  agent,  but  specially 


agrees  to  be  responsible, 
2.  Where  principal  is  concealed,  by 

(  1.  Agent's  pretending  to  be  principal,  or 
2.  Principal's  name  not  being  disclosed. 


Both  agent  and 
principal  are 
responsible. 


Where  agent  acts  fraudulently. 
II.  Where  agent  acts  as  agent,  but  exceeds  his  real  )  Agent  alone  is 
and  apparent  authority.  j      responsible. 

III.  In  all  other  cases.  i  princiPal  a!?ne 

j     is  responsible 


DIVISION   III. 


PARTNERSHIP. 


CHAPTER   XIII. 

RELATIONS   OF   THE   PARTNERS   TO   EACH   OTHER. 

1.  Definition. — Partnership  is  the  relation  established  by 
an  agreement  between  two  or  more  persons  to  combine 
their  money,  property,  labor,  or  skill  in  some  lawful  busi- 
ness, and  share  the  profits  in  certain  proportions.     The 
partners  collectively  are  in  many  respects  considered  as  a 
single  individual,  and  as  such  are  often  called  a  house,  or 
firm,  having  partnership  property,  and  a  firm  name,  under 
which  they  do  all  their  business.     Copartnership  means 
the  same  as  partnership. 

2.  Sharing  of  Profits  is  THE  MOST  IMPORTANT  OF  THE 

ELEMENTS    GOING    TO    MAKE    UP    A    PARTNERSHIP,  and  W6 

may  say  that,  in  general,  wherever  profits  are  shared,  the 
parties  are  partners.  Thus,  though  one  contributes  all  the 
money  (called  the  capital],  and  the  other  does  all  the  work, 
or  if  in  a  case  where  no  capital  is  needed  each  contributes 
only  his  labor,  still  if  they  are  to  share  the  profits  they  are 
partners.  But  a  clerk,  who  is  paid  by  being  given  a  share 
in  the  profits,  even  though  he  has  no  other  salary,  is  not  a 
partner. 

3.  Who  May  Be. — Any  one  who  may  do  business  alone — 
i.e.,  any  one  who  may  make   contracts,  may  become  a 


Partnership.  61 


member  of  a  partnership.*  But  no  one  can  be  made  a 
partner  against  his  will,  for  it  is  wholly  a  matter  of  con- 
tract. For  the  same  reason  no  new  member  can  be  intro- 
duced into  a  firm  without  the  consent  of  each  one.  This 
should  be  so,  for  the  relation  is  so  close,  and  the  power  of 
a  partner  so  great  (p.  63),  that  it  would  be  dangerous  to 
allow  it  to  be  exercised  over  one  without  his  own  consent. 
Thus  if  A  and  B  are  partners,  and  B  could  introduce  a 
third  he  might  bring  in  some  one  whom  A  would  never 
have  trusted  as  a  partner. 

4.  Formation. — A  PARTNERSHIP  is  FORMED  SIMPLY  AND 
ONLY  BY  AGREEMENT.     This  agreement  may  be  simply  a 
contract  in  so  many  words  to  be  partners,  or  it  may  be  very 
full  and  minute  in  its  details.     The  form  on  page  285  will 
give  an  idea  of  some  of  the  common  clauses.     It  may  be 
oral  or  written:  if  written  it  is  called  articles  of  copartner- 
ship.    The  proportion  of  the  profits  each  one  is  to  have  is 
usually  specified.    Parties  may  engage  in  business  together 
without  any  definite  agreement,  but  in  such  case  also  they 
are  partners,  for  one  is  implied. 

5.  Duration. — The  agreement  may  specify  a  time  at  which 
the  partnership  shall  terminate  (such  as  in  two  years),  or, 
as  is  generally  the  case,   nothing  may  be   said.     In   the 
former  case  neither  party  has  the  right  to  dissolve  it  until 
the  time  expires,  but  if  one  partner  commits  some  fraud,  or 
otherwise  misbehaves,  or  becomes  insane,  a  court  may  end  it. 
In  the  latter  case,   WHERE  NO  TIME  is  SPECIFIED  ANY 

PARTNER   MAY    DISSOLVE   A    PARTNERSHIP   AT   WILL.        He 

may  do  it  for  any  reason,  and  however  small  his  interest. 
It  may  seem  strange  that  so  many  partnerships  should 
continue  year  after  year,  while  it  is  in  the  power  of  any 
partner  to  dissolve  them  at  any  time  without  making  him- 

*  Except,  in  a  few  States,  married  women. 


62  General  Principles. 

self  responsible  to  the  others  for  any  loss.  The  reason  is 
that  in  such  cases  it  is  almost  always  to  the  best  interests 
of  each  one  to  continue. 

6.  Transfer  of  Interest. — If  the  partnership   is  for  no 
definite  time,  a  partner  may  sell  his  interest  in  the  common 
property  to  any  one  at  any  time.     This  is  probably  true 
also  where  it  was  formed  for  a  definite  period,  though 
having  contracted  not  to  do  so  he  would  be  responsible  to 
his  partners  for  having  broken  his  contract.     But  the  per- 
son to  whom  he  sells  does  not  thereby  become  a  partner 
in  his  place,  without  the  consent  of  the  other  partners 
(sec.  3). 

7.  Effect  of  Transfer. — THE  REAL  EFFECT  OF  A  TRANS- 
FER OF  INTEREST   IS   THE   DISSOLUTION   OF  THE  FIRM.      If 

the  new  person  is  received  by  all  the  others,  that  consti- 
tutes a  new  firm.  In  the  same  way,  whenever  an  old 
member  retires  from  the  firm,  it  is  the  formation  of  a  new 
one.  This  is  so  whether  the  name  changes  or  not. 

8.  Death. — THE  DEATH   OF  ANY   PARTNER  DISSOLVES 
THE  WHOLE  FIRM.     The  legal  representatives  of  the  dead 
partner  do  not  become  partners  themselves,  but  are  simply 
entitled  to  his  share  of  the  partnership  property;  or,  if  it 
is  sold,  to  his  share  of  the  proceeds.     Thus  we  see  that 
any  change  as  to  the  members  of  a  firm  dissolves  the  old 
firm,  and  makes  a  new  one.     Such  changes  are  continually 
occurring  without  any  disturbance  to  the  business. 

9.  Effect  of  Dissolution. — Upon  a  dissolution  each  part- 
ner is  entitled  to  demand  that  there  shall  be  an  accounting 
of  the  affairs  of  the  firm,  that  the  common  property  be 
sold,  and  that  he  be  paid  his  proportionate  share  of  what 
remains  after  paying  its  debts.     But  to  do  this  would  not 
only  take  time,  but  in  the  case  of  a  prosperous  business  it 
might  cause  much  loss  to  all  the  partners,  for  the  business 
itself,  the  trade,  would  be  scattered  and  lost. 


Partnership.  63 


10.  A  Common  Course.— Therefore  it  is  quite  common 
in  such  a  case  for  the  retiring  partner  to  sell  his  interest  as 
it  is,  for  a  given  sum,  to  some  of  the  old  partners  or  to 
some  one  else  whom  they  will  receive  as  a  new  partner, 
and  the  business  goes  on  as  before.     Such  a  transaction  in 
legal  effect,  is  simply  a  sale  from  the  old  firm  to  a  new  one 
of  all  the  firm  property  and  rights. 

11.  Rights  and  Duties. — Since  a  partnership  is  wholly  a 
matter  of  contract,  the  partners  have,  as  to  eacli  other,  only 
such  rights  and  duties  as  they  agree  upon.    If  any  one  acts 
contrary  to  that  agreement,  he  breaks  his  contract,  and  is 
responsible  to  his  partners  for  the  injury.     It  is  always  an 
implied  (if  not  expressed)  part  of  the  agreement,  that  each 
partner,  who  is  to  contribute  his  time  or  labor,  shall  exer- 
cise all  skill,    care,  and   diligence   in   the   business,   and 
without  other  compensation  than  his  agreed  share  of  the 
profits.     (See  sec.  1  of  next  chapter.) 


CHAPTER  XIV. 

RELATIONS   OF  THE   PARTNERS  TO   THIRD   PARTIES. 

1.  Authority  of  Partner. — The  most  important  rule  con- 
nected with  partnership  is  that  EACH  PARTNER  HAS  FULL 
AUTHORITY  TO  ACT  FOR  THE  FIRM,  in  any  matter  connected 
with  its  appropriate  business.  Each  is  the  agent  for  all,  or 
in  other  words,  for  the  firm.  But  as  to  matters  outside  of 
the  business,  he  is  not  an  agent,  and  if  he  attempts  to 
bind  the  firm,  it  is  the  act  of  an  agent  without  authority 
and  only  binds  himself  (p.  55).  Thus  in  a  house  en- 
gaged in  the  cotton  trade,  each  partner  may  buy  and  sell 


64  General  Principles. 

cotton  or  do  any  other  acts  necessary  to  carry  on  the  busi- 
ness, but  if  one  without  authority  from  the  rest  should 
buy  hardware,  the  firm  would  not  be  bound. 

2.  Authority:  Eight. — The  authority  of  a  partner  does 
not  depend  upon  the  agreement  but  is  a  legal  consequent 
of  the  relation,  whatever  the  agreement  provides.     Hence 
a  partner  may  have  the  apparent  authority  to  do,  what  he 
has  not  the  right  to  do  as  to  his  partners.     This  is  the  rule 
of  agency,  which  we  have  before  considered   (p.  53,   and 
note).     Thus  if  several  partners  agree  among  themselves 
to  attend  each  to  a  particular  department  of  the  business 
and  no  other,  each  binds  the  firm  though  he  does  an  act 
outside  of  his  department,  but  if  a.ny  loss  results  to  the 
firm  from  such  act  he  is  responsible  to  his  partners. 

3.  Liability  for  Debts. — Every  partner  is  liable  for  the 
whole  indebtedness  of  the  firm.     This   means  that  NOT 

ONLY  THE  COMMON  PROPERTY  BUT  ALSO  ALL  THE  PRIVATE 
PROPERTY  OF  EACH  PARTNER  MAY  BE  TAKEN  TO  SATISFY 

THE  DEBTS  OF  THE  FIRM.  This  is  so  no  matter  what  the 
arrangement  between  the  parties  is,  and  no  matter  how 
small  an  interest  any  one  partner  may  have.  This  shows 
the  danger  of  forming  partnerships  imprudently,  and 
affords  reason  for  the  rule  that  no  one  can  be  made  a 
partner  against  his  will.  A  secret  partner,  i.e.,  a  real  part- 
ner but  not  known  as  such  to  the  world,  is  responsible  in 
the  same  way.  He  is  an  undisclosed  principal  (p.  52). 
He  gets  the  profit :  he  must  bear  the  loss. 

4.  Precedence  of  Claims. — A  failure  in  business  means 
inability  to  pay  debts.     When  a  firm  fails  the  separate 
partners  may  perhaps  have  private  debts  also.     In  such 
case,  if  proper  legal  steps  are  taken,  the  private  property 
of  each  partner  may  be  reserved  to  pay  his  private  debts, 
and  the  partnership  property  set  apart  to  pay  the  partner- 


Partnership.  65 


ship  debts.     When  either  class  has  been  wholly  paid,  the 
surplus  property  is  applied  to  the  other  class.* 

5.  Effect  of  Dissolution. — We  have  considered  in  the  last 
chapter  the  effect  of  a  dissolution  of  the  firm  as  between 
the  partners.     Let  us  now  consider  its  effect  as  to  third 
parties  ;  (1)  as  to  the  debts  owed  by  the  firm,  and  (2)  as  to 
the  authority  of  the  partners. 

6.  As  to  Debts,  a  dissolution  makes  no  change.     All  the 
old  partners  remain  responsible  for  all  the  debts  existing 
at  the  time.     Thus  when  one  partner  retires  and  is  bought 
out  (as  is  said)  by  the  rest,  they  may  agree  to  assume  all 
the  responsibility  themselves,  but  if  they  fail  to  pay  the 
old  debts  he  must  do  so.     No  debtor  can  rid  himself  of  a 
debt  unless  the  creditor  consents. 

7.  As  to  Authority,  dissolution  makes  a  great  change. 
The  authority  of  each  to  act  for  the  firm  continues,  but 
only  for  the  purpose  of  winding  up  the  affairs.     He  cannot 
bind  the  firm  in  any  new  transaction.     Thus  if  it  be  a  firm 

*  Thus,  suppose  the  firm  of  A  &  B  fails,  owing  $60,000,  and 
having  $30,000  partnership  property  ;  suppose  A  alone  owes  besides 
$10,000,  and  has  $5000,  while  B  alone  owes  $5000  and  has  $10,000. 
The  firm  property  is  applied  to  the  firm  debts  and  pays  half,  leaving 
$30,000  unpaid.  A's  private  property  pays  half  his  private  debts 
leaving  $5000  unpaid.  B's  $10,000  pays  the  whole  of  his  private  debts 
and  $5000  is  left  to  be  applied  to  the  remaining  $30,000  firm  debts. 
The  net  result  would  be  that  each  would  owe  $25,000  of  firm  debts, 
and  A  would  owe  besides  $5000.  But  suppose  that  instead  of 
$10,000  B  had  had  $50,000,  all  the  rest  being  the  same.  This  would 
first  be  applied  to  his  private  debts,  leaving  $45,000  to  be  applied  to 
the  remaining  $30,000  of  partnership  debts,  which  it  would  entirely 
pay  and  still  leave  $15,000  his.  The  result  would  then  be  that  A 
would  owe  $5000,  but  B  would  owe  nothing  and  have  $15,000  left. 

Note  to  Teacher. — It  would  be  useful  to  vary  this  example  in  differ- 
ent ways,  and  have  the  scholar  calculate  in  each  case  the  per- 
centage paid. 


66  General  Principles. 

of  merchants  each  may  sell  the  stock  on  hand  but  cannot 
buy  new  goods.  Each  has  power  to  collect  money  due  tlife 
firm,  and  pay  its  debts,  but  cannot  incur  new  ones.  This 
section,  however,  applies  chiefly  to  a  case  where  the  busi- 
ness ceases  and  all  the  affairs  of  the  firm  are  wound  up  ;  if 
a  new  firm  is  formed  and  takes  the  whole  business  the 
partners  of  the  old  firm  who  do  not  remain  have  no  au- 
thority. 

8.  Notice  of  Dissolution. — But,  as  we  have  seen,  in  many 
cases  of  dissolution  a  new  firm  takes  the  business,  and 
immediately  makes  new  contracts  and  incurs  new  debts. 
Such  changes  often  occur  without  the  knowledge  of  out- 
siders, who  perhaps  act  upon  the  belief  that  the  firm  is  the 
same.     For  this  reason   UPON  A.   DISSOLUTION  THE  OLD 

PARTNERS  ARE  RESPONSIBLE  FOR  EVEN  NEW  DEBTS  UN- 
LESS THEY  HAVE  GIVEN  NOTICE  OF  THE  DISSOLUTION. 

This  rule  is  especially  important  with  regard  to  retiring 
partners.  The  notice  required  would  be,  as  to  those  who 
usually  dealt  with  the  firm,  some  actual  notice,  but  as  to 
the  rest  of  the  world  a  publication  in  some  newspaper 
would  be  sufficient. 

9.  Limited  Partnerships. — The  fact  that  when  a  person 
fails  in  business  all  his  property  may  be  taken,  has  some- 
what hampered  trade,  and  for  this  reason  has  led  to  laws 
in  many  States  by  which,  if  certain  things  are  done,  part- 
nerships may  be  formed  in  which  there  may  be  some  part- 
ners whose  private  property  shall  not  be  responsible  for 
the  firm  debts.      They  are   called   limited  partnerships. 
General  partners  are  those  liable  as  in  the  other  kind; 
special  partners  are  those  putting  in  a  certain  amount  of 
money  at  the  beginning,  and  losing  only  that  amount  if  a 
failure  occurs.     The  things  required  in  most  States  for  the 
formation  of  limited  partnerships  are:  (1)  the  arrangement 
must  be  in  writing,  signed  and  recorded  in  a  certain  public 


Partnership.  67 


office,  (2)  there  must  be  at  least  one  general  partner, 
(3)  the  special  partners  can  take  no  active  part  in  the 
business,  and  their  names  must  not  appear  in  the  firm 
name,  (4)  the  amount  they  contribute  must  be  actually 
paid  in  as  stated.  If  any  one  of  these  requirements  is 
neglected,  although  accidentally,  the  partnership  becomes 
one  of  the  ordinary  kind. 


General  Principles. 


SUMMARY  OF  LEADING  RULES  OF  PARTNERSHIP. 

I.   RELATIONS  OF  PARTNERS  TO  EACH  OTHER. 

1.  Sharing  of   PROFITS  is  the  most  important  of  the 
elements  going  to  make  up  a  partnership. 

2.  A  partnership  is  FORMED  simply  and  only  by  agree- 
ment. 

3.  Where  no  time  is  specified,  any  partner  may  DISSOLVE 
a  partnership  at  will. 

4.  The  real  effect  of  a  TRANSFER  of  interest  is  the  disso- 
lution of  the  firm. 

5.  The  DEATH  of  any  partner  dissolves  the  whole  firm. 

II.  RELATIONS  OF  PARTNERS  TO  THIRD  PARTIES. 

1.  Each  partner  has  full  AUTHORITY  to  act  for  the  firm. 

2.  Not  only  the  common  property,   but  also  all  the 
PRIVATE   PROPERTY  of  each  partner,   may  be  taken  to 
satisfy  the  debts  of  the  firm. 

3.  Upon  a  dissolution  the  old  partners  are  responsible 
for  even  new  debts,  unless  they  have  given  NOTICE  OF  the 
DISSOLUTION. 


Partnership.  69 


A  PARTNERSHIP 
I.  Is  FOKMED 

j'    I.   By  EXPRESS  AGREEMENT, 

j  1.  To  contribute  property,  labor,  or  skill,  and 
(  2.  To  share  profits. 
III.  By  IMPLIED  AGREEMENT,  implied  from 

1.  Contributing  property,  labor,  or  skill,  and 

2.  Sharing  profits. 

II.  Is  DISSOLVED 

I.  When  formed  for  a  definite  time: 

1.  By  CONSENT  of  all  parties, 

2.  By  EXPIRATION  of  time, 

3.  By  a  COURT  for  good  cause, 

4.  By  DEATH  of  a  partner,  or 

5.  By  TRANSFER  of  a  partner's  interest. 
II.  When  no  time  is  specified : 

1.  By  any  partner  AT  WILL, 

2.  By  DEATH  of  a  partner,  or 

3.  By  TRANSFER  of  a  partner's  interest, 


DIVISION    IT. 

CORPORATIONS:    GUARANTY:    TIME 
TO  SUE. 


CHAPTER    XV. 

BUSINESS    CORPORATIONS. 

1.  A  Corporation  is  a  fictitious  person.     It  consists  of  a 
number  of  natural  persons,  treated  under  the  law  as  a  new 
and  distinct  individual.     These  persons  are,  in  business 
corporations,  the  stockholders. 

A  corporation  (often  called  company]  does  not  consist  of 
the  property  it  owns.  Thus  "The  New  York  and  New 
Haven  Railroad  Company"  would  be  one  thing,  and  "The 
New  York  and  New  Haven  Railroad"  another.  The  com- 
pany may  lose  its  railroad  and  yet  exist.  Nor  is  a  corpora- 
tion a  partnership.  In  partnership  the  word  "firm"  is  but  a 
convenient  name  for  all  the  partners  taken  collectively,  just 
as  the  word  "family"  means  the  father,  mother,  brothers, 
etc.,  but  a  corporation  is  a  different  individual  from  its 
stockholders.  When  a  firm  owns  property  each  partner 
owns  it  jointly  with  the  rest,  but  stockholders  do  not  own 
the  property  of  a  corporation;  the  corporation  owns  it. 

2.  Subject  to  Laws. — Corporations  are  now  very  common, 
and  are  organized  to  carry  on  all  kinds  of  business,  such  as 
railway  transportation,  insurance,  banking,  all  kinds  of 
manufacturing,  mining,  trading,  etc.     All  such  companies 
are  subject  to  all  the  laws,  as  other  persons;  must  carry 


Corporations.  71 


out  their  contracts;  may  sue  and  be  sued  in  the  courts; 
may  own  and  transfer  property,  etc.  In  short,  the  rule  is 
general  that  when  the  law  says  "person,"  it  includes 
corporations  as  well  as  natural  persons. 

3.  Formation, — CORPORATIONS  ARE   FORMED   ONLY  BY 
AN   ACT  OF  THE   LEGISLATURE.     A  number  of    persons 
cannot  come  together  and  make  themselves  a  company,  as 
they  would  a  firm,  by  simply  agreeing  that  they  shall  be. 
There  are  two  ways  in  which  they  are  formed:  (1)  by  a 
special  law  (called  a  charter)  enacting  that  certain  persons 
(naming  them)  shall  be  a  corporation,  having  a  certain 
name  and  certain  corporate  powers,  (2)  by  a  general  law 
providing  that  any  body  of  men  may  organize  a  corporation 
of  a  certain  character  by  doing  certain  things.     Business 
corporations  are  more  commonly  organized  in  the  latter 
way.     The  necessary  acts  are:  (1)  for  the  parties  to  make 
and  sign,  and  file  in  some  public  office,  a  paper  (often 
called  articles  of  association)  showing  the  name,  location, 
and  business  of  the  proposed  company,  and  (2)  to  subscribe 
a  certain  amount  of  money  or  property,  which  is  to  become 
the  property  of  the  corporation  and  to  be  used  for  its  pur- 
poses, and  (3)  to  elect  officers  and  do  certain  other  acts. 

4.  Stock. — The  money  or  property  so  subscribed  is  called 
the  company's    stock,  or  capital,   or  capital  stock.     The 
persons  subscribing   (i.e.,  contributing)   to  the  stock  are 
called  stockholders.     The  capital  is  divided  into  a  number 
of  shares,  and  each  stockholder  is  given  a  certificate  show- 
ing how  many  shares  his  interest  amounts  to.     He  is  then 
said  to  own  those  shares.*     He  may  sell  them  to  any  one 


*  Thus  suppose  they  value  the  whole  capital  at  $100,000,  and 
divide  it  into  1000  shares.  $100  is  called  the  par  value  of  a  share. 
A.  who  has  contributed  $35,000  in  money  or  property,  receives  a 
certificate  showing  that  he  owns  350  shares. 


72  General  Principles. 

else,  who  thereupon  becomes  a  stockholder  in  his  place. 
Thus  the  members  of  a  corporation  may  continually  change, 
but  the  corporation  remains  the  sam.^all  the  time.  (See 
p.  286  for  form  of  certificate.) 

5.  How  Managed. — A  corporation  acts  by  agents.     The 
stockholders  meet  annually  and  elect  from  among  their  owii 
number  a  body  of  men  called  directors  or  trustees  (from 
3  to  25),  who  have  charge  of  the  general  management  of 
the  business.     The  directors  also  have  regular  meetings 
(monthly  or  otherwise)  at  which  they  decide  upon  the  more 
important  matters  connected   with   the   business   of  the 
company.     Besides  these,  other  officers,  viz.,  a  president, 
secretary,  treasurer,  etc.,  are  elected  by  the  stockholders, 
or  sometimes  by  the  directors,  and  they,  with  the  other 
clerks  and  agents,  carry  on  the  ordinary  every-day  business 
of  the  corporation.     If  a  stockholder  thinks  any  of  these 
officers  have  acted  unlawfully  and  to  the  injury  of  the  com- 
pany, he  may  have  the  matter  reviewed  by  a  court. 

6.  Powers. — We  have  seen  that  a  natural  person  may  do 
anything  not  expressly  forbidden  by  law  (p.  18).     With 
corporations — they  being  fictitious  persons  and  having  no 
natural  rights — the  rule  is  directly  the   opposite;    viz., 

CORPORATIONS  HAVE  POWER  TO  DO  ONLY  THE  ACTS  EX- 
PRESSLY ALLOWED  BY  THE  LAW  UNDER  WHICH  THEY  ARE 

INCORPORATED.  Therefore  they  cannot  make  all  kinds  of 
contracts,  and  it  is  important  to  study  the  special  or  gen- 
eral law  under  which  a  corporation  was  organized,  when  it 
is  desired  to  ascertain  exactly  what  it  can  do.  The  powers 
ordinarily  granted  them  are  all  the  powers  usual  or  neces- 
sary in  carrying  on  the  business  for  which  they  were 
organized.  Within  its  business  a  corporation  may  do  all 
acts,  and  make  all  contracts,  that  a  natural  person  could, 
but  none  outside  of  that  business.  Thus  a  corporation 
cannot  buy  more  real  estate  than  is  necessary  to  its  business. 


Corporations. 


7.  Dissolution.  —  Though  some  corporations  may  and  do 
last  forever,  others  are  formed  for  a  limited  time.     The 
ordinary  methods  in  which   one  is  dissolved  are:  (1)  if 
formed  for  a  limited  time,  by  its  expiration,  (2)  by  the 
voluntary  surrender  of  its  rights  to  the  State,  (3)  in  some 
cases  by  a  law  passed  by  the  Legislature  which  created  it, 
(4)  by  becoming  insolvent,  unable  to  pay  its  debts. 

Note  to  Teacher.  —  Interesting  and  useful  historical  references  could 
here  be  made  upon  the  subject  of  old  corporations,  to  such  as 
the  Bank  of  England,  the  East  India  Company,  Yale  College, 
Harvard  College,  etc.,  etc. 

8.  Effect  of  Dissolution.  —  On  dissolution  all  the  remain- 
ing property  of  the  corporation  is  placed  in  the  hands  of  a 
responsible  person,  called  a  receiver,  who  sells  it  and  dis- 
tributes the  proceeds  among  the  creditors,  in  proportion  to 
their  debts,  and  if  there  is  any  left,  distributes  it  among 
the  stockholders. 

9.  Liability  of  Stockholders.  —  The  debts  are  the  debts 
of  the  corporation,  not  of  the  stockholders.    A  partner,  we 
have  seen  (p.  64),  is  personally  liable  for  all  the  debts  of 
the  firm,  but  it  is  at  this  point  the  strongest  distinction 
lies  between  a  partner  and  a  stockholder.     The  rule  at  one 
time  was  that  the  stockholder  was  not  responsible  to  any 
amount,  and  this  is  now  the  rule  in  the  absence  of  some 
special  provision.     But  this  came  to  be  used  as  a  means  of 
fraud,  so  that  now  stockholders  of  many  business  corpora- 
tions are  often  made  responsible  to  a  limited  amount. 
Thus,  if  one  owns  a  certain  amount  of  stock,  he  is  often 
made  responsible  for  an  equal  amount  of  the  debts. 

10.  Purposes.  —  The  chief  purposes   of  corporations  are 
three,  the  first  being  to  the  advantage  of  the  public,  and  the 
other  two  to  private  advantage.     (1)  They  are,  at  least  a 
convenient  if  not  a  necessary,  means  for  the  carrying  out  of 
great  business  enterprises,  such  as  the  building  of  railroads, 


74  General  Principles. 

canals,  etc.     People  would  and  could  not  come  together  in 
partnerships  large  enough  or  enduring  enough  for  such 
purposes.     (2)  They  allow  of  an  easy  transfer  of  ownership, 
while  in  partnership  a  transfer  dissolves  the  firm.    (3)  The 
responsibility  for  debts  is  very  much  less. 
Note  to  Teacher. — The  first  of  these  purposes  should  be  illustrated 
by  reference  to  real  cases,  showing  why  partnerships  would  be 
impracticable  in  cases  of  railroad  enterprises,  etc. 


Corporations. 


75 


CHIEF  DIFFERENCES  BETWEEN  A  PARTNERSHIP  AND  A 
CORPORATION. 


PARTNERSHIP. 


CORPORATION. 


I.  LEGAL  CHARACTER: 

II.  FORMATION: 
III.  DEATH: 


IV.  TRANSFER    OP   IN- 
TEREST: 

V.  POWERS: 


VI.  DEBTS: 


A  collection  of  natu- 
ral persons. 

By  agreement. 

Of  partner;  dissolves 
partuersliip. 


By  partner;  dissolves 
partnership. 


A  fictitious  person. 


By  the  Legislature. 

Of  stockholder;  those 
obtaining  his  stock 
become  stockhold- 
ers. 

By  stockholder;  new 
stockholder  takes 
his  place. 


Has  powers  of  the  Has  only  the  powers 
natural  persons  especially  confer- 
composing  it.  red  by  law. 

All  partners  liable  In  some,  stockholders 
for  all  debts.  not  liable;  in  others, 

liable  to  a  limited 
amount. 


76  General  Principles. 

CHAPTER  XVI. 

GUARANTY  OR  SURETYSHIP. 

1.  Definition. — A  guaranty  has  been  defined   (p.  37). 
Suretyship  is  another  word  for  the  same  relation.*    A 
guarantor  or  surety  is  one  who  agrees  that  a  certain  thing 
shall  be  done  by  another.     This  relation  is  quite  common 
in  business  life.     Thus,  it  is  often  made  the  condition  of  a 
loan,  or  a  sale,  that  payment  shall  be  guaranteed  by  some 
one  besides  the  debtor.     Clerks  in  a  bank  and  others  in 
positions  of  trust,  especially  where  employed  to  handle 
money,  are  often  required  beforehand  to  give  bonds  of  in- 
demnity, as  they  are  called.     Such  a  bond  is  a  contract 
made  by  some  friend  of  the  person  employed,  agreeing  to 
make  good  any  loss  caused  by  him  (p.  286,  for  form).     The 
indorser  of  a  note  is  a  surety  (p.  133). 

2.  The  Principal  is  the  person  for  whom  the  guaranty  is 
given;  in  other  words,  the  principal  debtor.     A  contract  of 
guaranty  implies   the  existence   of  some   other  contract 
made,  or  duty  owed,  by  the  principal.     This  may  be  called 
the  primary  contract,  the  guaranty  being  the  secondary 
contract.     Thus,  in  the  case  of  a  sale,  the  primary  contract 
is  the  sale,  and  is  between  the  seller  and  buyer;  the  second- 
ary contract  is  between  the  seller  and  surety:  in  the  case 
of  the  clerk,  the  primary  contract  is  the  employment,  and 
is  between  the  employer  and  clerk;  the  secondary  contract 
is  between  the  employer  and  surety. 

3.  Consideration, — A  guaranty,  being  a  contract,  must 
have  a  consideration  to  be  binding.     If  it  is  made  at  the 

*  In  a  popular,  though  not  in  a  legal  sense.     We  shall  use  them  in 
the  same  sense  here. 


Guaranty.  77 

same  time  as  the  primary  contract,  the  same  consideration 
will  support  both.  Thus  if  the  loan  or  sale  are  made  on 
condition  that  the  guaranty  be  given,  that  is  consideration 
(p.  33,  sec.  3).  But  if  the  secondary  contract  is  made 
after  the  primary,  and  not  in  pursuance  of  an  agreement 
made  with  the  primary,  then  there  must  be  some  new  con- 
sideration. Thus,  if  the  bond  of  indemnity  was  not  re- 
quired or  given  until  after  the  hiring,  it  must  have  some 
additional  consideration,  as,  for  instance,  something  paid 
to  the  surety.* 

4.  Writing. — We  have  already  seen  that  EVERY  CONTRACT 

OF  GUARANTY  MUST  BE  IN  WRITING  AND  SIGNED  BY  THE 
SURETY  (p.  37). 

5.  Change  of  Primary  Liability  MAKES  THE  SECONDARY 
VOID.     In  other  words,  if  I  loan  money  to  you  on  B's  guar- 
anty, and  then  afterwards  release  you,  that  also  releases 
him.      Any  change  in  the   primary  contract  makes  the 
secondary  invalid.     Thus,  if  when  a  debt  becomes  due  the 
time  of  payment  is  extended,  as  by  taking  a  new  note,  this 
releases  the  surety  unless  done  with  his  consent.     But  to 
merely  delay  suing  the  principal  does  not  have  this  effect. 

Note  to  Teacher. — This  should  be  dwelt  upon  in  connection  with  in- 
dorsed notes,  as  it  is  a  common  business  operation  to  grant  exten- 
sions, by  taking  new  notes.  If  this  is  done  without  the  consent 
of  the  indorsers,  they  are  released. 

6.  Notice  to  Surety. — If  the  guaranteed  debt  is  not  paid 
when  due,  the  creditor  is  under  no  obligation  to  the  surety 
to  sue  the  principal.     He  must,  however,  give  notice  to  the 
surety  as  soon  as  he  can.     Thus,  if  the  cashier  of  a  bank 
steals  its  money,  his  bondsmen  must  be  notified  of  it,  or 
they  are  not  bound.     In  the  case  of  indorsers  upon  com- 
mercial paper  the  time  within  which  this  notice  must  be 

*  If,  however,  the  bond  itself  says  that  there  was  a  consideration, 
it  cannot  denied. 


78  General  Principles. 

sent  is  fixed,  being  a  day  (p.  137).  But  in  other  cases  of 
guaranty  a  longer  time  is  allowed,  though  there  is  no  fixed 
period.  A  week's  delay  might  release  the  surety.  The 
object  of  requiring  this  notice  is  that  the  surety  may  take 
such  measures  immediately  as  he  sees  fit,  to  secure  himself 
against  loss. 

7.  Surety's  Right. — WHEN  A   SURETY  HAS   PAID  THE 

DEBT,    HE    HAS    A    CLAIM    FOR    IT    UPON    THE    PRINCIPAL 

DEBTOR.  It  is  as  if  the  creditor's  claim  were  transferred 
to  him.  So,  also,  if  the  creditor  holds  any  other  security 
for  the  debt,  such  as  stock,  or  bonds,  these  pass  to  the 
surety  when  he  pays  the  debt.  He  stands,  as  we  say,  in 
the  creditor's  shoes. 

8.  Two  or  More  Sureties. — If  there  is  more  than  one 
surety  upon  any  debt,  all  becoming  sureties  at  the  same 
time,  each  one  is  responsible  for  the  whole,  but  if  any  one 
pays  it,  he  may  collect  an  equal  share  out  of  the  others. 
Thus,  suppose  on  the  debt  of  B  to  A  there  are  three  sure- 
ties, C,  D,  and  E.     If  B  does  not  pay  it  A  may  claim  it  all 
from  C,  D,  or  E,  but  if  D  should  pay  it  he  might  claim 
from  C  and  E  each  one-third  of  what  he  paid.     This  sec- 
tion does  not  apply  to  indorsers,  because  usually  they  do 
not  indorse  at  the  same  time,  but  successively  (Chap. 
XXV.,  sec.  3,  6). 


CHAPTER  XVII. 

LIMITATION   OF  TIME  TO   SUE. 

1.  Limitation. — In  the  chapter  on  Remedy  we  have  seen 
that  the  remedy  is  obtained  by  applying  to  a  court  for  it, 
i.e.,  suing.  This  the  injured  party  may  do  as  soon  as  the 


Time  to  Sue.  79 


wrongful  act  has  been  committed,  sometimes,  as  in  cases 
of  injunction,  before  it  has  been  done,  and  when  merely 
threatened.  Thus  in  an  ordinary  contract  to  pay  money, 
as  a  note,  if  it  is  not  paid  on  the  day  when  due,  the  con- 
tract is  broken,  and  suit  may  be  commenced  the  next  day. 
But  in  every  case  and  in  every  State  the  right  to  sue  lasts 
only  for  a  time,  generally  a  few  years.  One  may  not  re- 
serve the  right  forever. 

2.  The  Reason  for  this  is  two-fold:    (1)  old  and  stale 
claims  are  more  likely  to  be  ill-founded,  for  if  the  claim 
was  just  we  may  suppose  some  attempt  would  have  been 
made  to  enforce  it;  (2)  it  is  considered  best  that  a  person 
should  not  be  troubled  with  an  old  claim,  whether  just  or 
unjust,  because  he  has  been  led  to  believe  that  it  would  not 
be  pressed. 

3.  The    Time  within  which  suit  must  be  commenced 
varies  in  different  classes  of  cases  from  one  to  twenty  years, 
and  differs  in  different  States.     Each  State  fixes  its  own 
rule.     FOR  ORDINARY  BUSINESS  CONTRACTS  THE  TIME  AL- 
LOWED TO  COMMENCE  SUIT  USUALLY  IS  FIVE  OR  SIX  YEARS. 

Many  States  make  six  years  the  limit  for  oral  contracts,  but 
allow  a  longer  time,  ten  to  twenty  years,  on  written  contracts. 
The  reason  is  that  spoken  words  are  more  likely  to  be  for- 
gotten than  written  words.  Other  States  allow  the  longer 
period  only  on  contracts  having  a  seal  attached;  because  in 
former  times  a  paper  having  a  seal  was  considered  a  more 
formal  and  solemn  instrument,  and  therefore  there  was  less 
likelihood  of  mistake  about  it.  After  the  time  has  expired 
the  debt  is  popularly  said  to  be  outlawed,  and  cannot  be 
enforced. 

4.  Change  of  Ownership  in  the  claim  does  not  affect  the 
time.     Thus  if  one  buys  a  claim,  on  which  the  time  is  six 
years,  five  years  after  it  is  due,  he  has  but  one  year  to  com- 
mence suit.     The  time  occupied  by  the  suit  is  of  no  impor- 


80  General  Principles. 

tancc.  If  commenced  within  thu  six  years  (or  other  period) 
after  it  could  be,  it  is  sufficient,  though  the  suit  itself  should 
take  years. 

5.  Part-Payment. — The  period  of  limitation  ordinarily 
begins  to  run  on  the  day  when  the  debt  is  due.     But  if  at 
any  time,  either  before  or  after  that  period  has  expired, 
there  is  any  part-payment  of  the  debt  made,  that  renews 
the  claim  and  the  period  begins  to  run  on  that  day.* 

6.  Subsequent  Promise. — So  also  if  the  debtor  at  any  time 
after  it  is  due  makes  a  written  promise  to  pay  the  debt,  or 
a  written  acknowledgment  of  its  existence  in  such  form  as 
to  be  equivalent  to  a  promise,  the  claim  is  renewed  and  the 
period  begins  to  run  from  that  time.     The  reason  why  a 
part-payment,  or  subsequent  promise,  or  acknowledgment 
thus  extends  the  time  is  this:  the  object  of  the  limitation 
is  to  prevent  suits  on  uncertain   claims,  but  any  one  of 
those  three  circumstances  is  clear  evidence  from  the  party 
himself  that  the  claim  is  not  uncertain.     It  amounts  to  a 
new  promise  (i.e.,  contract),  and  the  creditor  should  have 
the  full  time  to  enforce  the  new  contract. 

7.  Bank-Bills,  issued  and  used  as  money,  are  an  excep- 
tion to  the  foregoing  rules.     They  never  became  invalid 
from  lapse  of  time. 

*  Thus  suppose  a  note  due  on  January  6,  1870,  and  not  paid;  the 
creditor  may  sue  upon  it  any  time  between  January  7, 1870,  and  Jan- 
uary 7, 1876;  suppose  $10  paid  upon  it  cither  as  interest  or  principal 
(p.179),  on  April  24,  1875;  the  time  would  then  expire  April  24,  1881 ; 
if  the  payment  was  made  after  the  time  had  expired,  as  for  instance, 
March  5,  1877,  it  would  revive  the  claim  and  the  time  would  not 
expire  again  until  March  5, 1883. 


Time  to  Sue.  81 


SUMMARY  OF  LEADING  RULES. 


I.  CORPORATIONS. 

1.  Corporations  are  FORMED  only  by  an  act  of  the  Leg- 
islature. 

2.  Corporations  have  POWER  to  do  only  the  acts  expressly 
allowed  by  the  law  under  which  they  are  incorporated. 

II.  GUARANTY. 

1.  Every  contract  of  guaranty  must  be  IN  WRITING  and 
signed  by  the  surety. 

2.  CHANGE  of  primary  liability  renders  the  secondary 
void. 

3.  When  a  SURETY  HAS  PAID  the  debt  he  has  a  claim 
for  it  upon  the  principal  debtor. 

III.  LIMITATION  OF  TIME. 

1.  For  ordinary  business  contracts  the  time  allowed  to 
commence  suit  usually  is  FIVE  OR  six  YEARS. 


82  General  Principles. 


REVIEW  QUESTIONS. 

Agency. 

1.  What  is  meant  by  agency?     Define  principal.     Define  agent. 

2.  How  many  persons  are  concerned  in  an  act  of  agency?     State 

the  different  relations  arising. 

3.  State  the  rule  as  to  what  contracts  one  may  make  through  an 

agent.     May  minors  act  as  agents? 

4.  How  may  agents  be  appointed?    What  is  a  power  of  attorney? 

5.  Where  an  agent  is  appointed  or  employed  to  do.  a  particular 

thing,  has  he  authority  to  do  anything  else?  What  is  his 
power,  when  employed  for  a  general  class  of  duties? 

6.  May  the  principal   take  away  an  agent's  authority?    When? 

What  would  be  the  effect  of  putting  an  end  to  an  agency 
when  by  so  doing  the  principal  broke  his  contract  with  the 
agent?  What  is  the  effect  of  the  death  of  the  principal? 

7.  What  is  a  sub-agent? 

8.  What  is  the  principal's  duty  to  his  agent? 

9.  Is  one  party  ever  responsible  for  the  acts  of  another? 

10.  What  is  the  fundamental  rule  of  agency?    Explain  the  differ- 

ence between  a  principal's  duty  to  his  agent  and  to  the  third 
party. 

11.  If  one  who  is  really  acting  as  agent  for  some  one  else,  causes  or 

allows  the  third  party  to  believe  he  is  acting  for  himself,  is 
the  principal  responsible  for  his  acts?  Why?  State  the  rule 
as  to  the  responsibility  of  an  unknown  principal. 

12.  What  is  the  effect  of  an  agent's  doing  an  act  which  he  was  not 

authorized  to  do?     Whose  act  is  it? 

13.  Can  an  agent  give  himself  authority?     What  effect  has  his  say- 

ing that  he  has  authority? 

14.  Give  examples  of  an  agent's  appearing  to  have  authority  which 

he  really  has  not.  In  such  case  is  the  principal  bound  by  the 
act?  Why?  State  the  difference  between  the  authority  and 
the  right  of  an  agent  to  do  an  act. 

15.  What  is   ratification,  in  agency?    Its  effect?    Its  effect  when 

made  under  a  mistake  as  to  the  circumstances?    How  made? 

16.  What  in  general  is  the  agent's  duty  to  his  principal?    Name  and 

illustrate  the  three  implied  duties. 


Review  Questions.  83 

17.  If  one  buys  goods  as  the  agent  of  another  is  the  agent  responsi- 

ble for  payment?  State  the  general  rule  of  which  that  is  an 
example.  Its  reason.  Its  five  exceptions  and  the  reason  for 
each. 

18.  What  are  public  agents?    Are  they  personally  responsible  for 

contracts  they  had  no  authority  to  make? 

19.  What  is  the  difference  (if  any)  in  the  duties  and  responsibilities 

assumed  by  a  person  when  he  acts  with  the  principal,  and 
when  he  acts  with  the  agent? 

20.  State  the  cases  in  which  both  agent  and  principal  are  responsi- 

ble to  the  third  party  for  an  act  of  the  agent.  Those  in  which 
the  agent  alone  is  responsible.  Those  in  which  the  principal 
alone  is  responsible. 

21.  Where  both  agent  and  principal  are  responsible,  how  do  we 

determine  which  must  finally  bear  the  loss? 

Partnership. 

22.  What  is  partnership?    How  is  a  firm  formed?    Will  an  agree- 

ment to  share  profits  alone  make  a  partnership? 

23.  Who  may  become  partners?     Can  a  majority  of  the  partners 

introduce  a  new  member  without  the  consent  of  the  rest?  If 
there  were  ten  partners,  could  nine  do  so?  Why? 

24.  How  long  does  a  partnership  last?    If  no  time  is  specified  may 

any  partner  dissolve  it  when  he  chooses? 

25.  What  is  the  effect  of  a  transfer  by  one  partner  of  his  interest  in 

a  firm  to  some  one  else?     Does  that  person  become  a  partner? 

26.  What  is  the  effect  of  the  death  of  a  partner? 

27.  What  becomes  of  the  firm's  property  on  dissolution?     State  a 

common  way  in  which  the  business  continues  though  a  firm 
is  dissolved. 

28.  What  rights  and  duties  have  partners  as  to  each  other? 

29.  State  the  difference  between  the  right  and  the  authority  of  a 

partner. 

30.  How  far  does  his  authority  extend? 

31.  State  the  rule  as  to  the  responsibility  of  a  partner  for  the  debts 

of  the  firm.  Can  a  partner's  private  property  be  taken  from 
him  to  pay  the  firm's  debts? 

32.  What  is  a  secret  partner?    Is  he  responsible  for  firm  debts? 

33.  In  a  case  of  failure,  where  there  are  firm  debts  and  firm  prop- 

erty, and  the  separate  partners  also  have  separate  debts  and 


84  General  Principles. 

private  property,  state  the  way  iu  which  the  property  is 
applied  to  pay  the  debts. 

34.  What  is  the  effect  of  dissolution  upon  a  partner's  responsibility 

for  the  debts?  In  what  cases,  and  for  what  purpose  is  a 
notice  of  dissolution  necessary?  How  is  it  given? 

35.  What  authority  has  each  partner  in  winding  up  the  business? 

36.  What  is  a  limited  partnership?     How   formed?     What   is  a 

special  partner? 

37.  Enumerate  the  different  ways  in  which  a  partnership  is  dissolved. 

Corporations. 

38.  What  is  a  corporation?    State  the  difference  in  character  be- 

tween a  partnership  and  a  corporation. 

39.  How  formed?     State  two  ways. 

40.  What  is  stock?    A  stockholder?    May  a  stockholder  sell  his 

shares  without  the  consent  of  the  other  stockholders?  What 
is  the  effect  of  his  so  doing? 

41.  By  whom  are  the  every-day  business  affairs  of  a  corporation 

conducted?    By  whom  are  the  important  affairs? 

42.  Have  corporations  all  the  powers  to  contract  of  a  natural  person  ? 

By  what  are  their  powers  regulated?  What  in  general  are 
their  powers? 

43.  When  is  a  corporation  dissolved?    What  becomes  of  its  prop- 

erty on  dissolution? 

44.  Are  stockholders  ever  responsible  for  the  debts  of  a  corporation? 

45.  Why  are  corporations  formed?    State  three  reasons. 

46.  State  the  difference  between  a  partnership  and  a  corporation,  as 

to,  (1)  legal  character;  (2)  manner  of  formation;  (3)  death  of 
partner  or  stockholder;  (4)  transfer  of  interest;  (5)  powers; 
and  (6)  debts. 

Guaranty. 

47.  What  is  a  guaranty?    A  principal?    A  surety? 

48.  Explain  the  primary  and  secondary  contracts.     Which  of  them 

is  the  guaranty?  When  is  one  consideration  enough  for  both 
contracts? 

49.  Is  an  oral  guaranty  binding? 

50.  What  is  the  effect  upon  the  secondary  contract  of  changing  the 

primary  ? 


Hem&w  Questions. 


51.  State  the  rule  as  to  notifying  a  surety. 

52.  What  right  has  a  surety  who  pays  a  guaranteed  debt? 

53.  When  there  are  two  or  more  sureties  what  are  their  respective 

rights? 

Time  to  Sue. 

54.  What  is  it  to  sue?    Can  one  sue  for  a  debt  before  it  is  due? 

What  is  the  first  day  suit  can  be  brought? 

55.  How  long  may  one  reserve  the  right  to  sue,  in  ordinary  commer- 

cial cases?    Why  not  forever? 

56.  What  two  circumstances  will  extend  the  time?    How  long  will 

they  extend  it? 

57.  Name  a  kind  of  contract  not  subject  to  the  rule  of  limitation. 


PART  II. 

PRINCIPLES  OF  PARTICULAR  CASES. 


DIVISION    I. 

SALE    OF    GOODS. 


CHAPTER  XVIII. 

REQUISITES   OF    A    SALE. 

1.  A  Sale  is  AN  AGREEMENT  TO  EXCHANGE  PROPERTY 
FOR -MONEY.  In  other  words  it  is  an  agreement  by  the 
owner  of  certain  property  with  another  that  the  property 
shall  thereafter  belong  to  the  latter,  and  that  he  shall  pay 
for  it.  It  is  a  change  of  the  ownership  (often  called  the 
title)  for  money. 

Possession  is  not  the  same  as  ownership.  One  may  own 
what  he  has  no  right  to  possess,  or  he  may  have  the  right 
to  possess  what  he  does  not  own  (p.  93.  sec.  3).  We  also  see 
that  an  agreement  to  sell  at  some  future  time  is  not  a  sale. 
Thus  if  A  makes  a  sale  to  B,  the  property  becomes  B's 
instantly,  and  A  is  simply  entitled  to  the  price;  but  if  A 
agrees  to  sell  to  B  next  month,  it  remains  A's  meanwhile, 
and  if  during  that  time  he  should  make  an  actual  sale  of 
the  same  property  to  C,  it  would  become  C's,  though  A 
would  have  to  answer  to  B  for  the  breach  of  his  contract.* 

*  A  sale  is  an  executed  contract,  an  agreement  as  to  the  present, 
an  agreement  that  the  ownership  does  change:  an  agreement  to  sell  is 
a  promise,  an  agreement  as  to  the  future,  an  agreement  that  the 
ownership  shall  change. 


Sale  of  Goods. 


2.  When  Sale  is  Complete. — The  sale  is  complete  as  soon 
as  the  agreement  is  made.     If  there  is  a  sale,  the  owner- 
ship changes  immediately,  and  if  there  is  an  agreement 
that  the  ownership   does  change  immediately  there  is  a 
sale.     This  is  so  whether  the  goods  are  delivered  or  not,  or 
whether  the  price  is  paid  or  not.     Delivery  and  payment 
are  not,  in  general,  necessary  to  make  the  sale  complete. 
In  the  ordinary  case,  when  the  parties  come  to  an  agreement 
but  nothing  is  said  about  when  the  price  shall  be  paid,  or 
when  the  goods  shall  be  delivered,  the  ownership  changes 
immediately,  though  the  seller  has  the  right  to  keep  them 
until  he  is  paid. 

3.  Conditional  Sale. — But  the  parties  if  they  choose  may 
agree  that  the  goods  shall  not  become  the  buyer's  until  cer- 
tain things  are  done,  as,  for  example,  until  they  are  paid 
for,  or  until  they  are  delivered.     So  they  may  make  any 
other  condition.     The  result  would  be  that  such  an  agree- 
ment would  not  be  a  sale  but  only  in  the  nature  of  an 
agreement  to  sell.    The  property  would  belong  to  the  seller 
until  the  condition  was  performed. 

4.  The  Importance  of  knowing  the  point  of  time  when 
the  ownership  changes,  i.e.,  of  knowing  whether  an  agree- 
ment ib  for  a  present  or  a  future  sale,  is  not  very  great  if 
the  whole  agreement  is  carried  out,  the  goods  delivered  and 
the  price  paid;  but  it  is  sometimes  great  if  the  agreement 
cannot  be  carried  out.     Thus  suppose  the  property  is  mean- 
while destroyed  by  fire.     The  owner  at  the  time  must  bear 
the  loss,  no  matter  who  possesses  them.     If  it  was  a  sale 
the  buyer  must  nevertheless  pay  for  them:  if  it  was  only 
an  agreement  for  a  future  sale  he  need  not  pay,  because 
the  seller  cannot  carry  out  his  part  of  the  agreement. 

5.  The  Requisites. — In  defining  a  sale  we  have  already 
really  explained  what  is  necessary  to  constitute  one.     But 
stiles  form  so  important  a  part  of  commerce  that  it  will  be 


88  Particular  Cases. 

well  to  state  more  fully  what  has  been  already  implied. 
We  may  say  that  five  things  are  necessary  to  every  sale:  (1) 
that  the  agreement  should  be  binding,  (2)  that  the  property 
exist,  (3)  that  it  be  owned  by  the  seller,  (4)  that  the  agree- 
ment should  be  with  regard  to  some  particular  property,  or 
some  particular  property  should  be  set  apart  as  the  property 
sold,  and  (5),  that  the  consideration  should  be  money.  An 
agreement  to  sell  only  requires  the  first  and  the  last,  a  sale 
all  of  the  five. 

6.  A  Binding  Agreement. — In  Chapter  II.  have  been 
enumerated  the  seven  requisites  of  a  binding  contract,  and 
we  need  not  dwell  on  them  here.     BEING  A  CONTRACT,  A 

SALE     MUST     HAVE     ALL    THE     REQUISITES     OF   A    BINDING 

CONTRACT.  Let  us  apply  each  one  of  those  requisites  in 
turn  to  the  subject  of  a  sale. 

The  sale  of  any  kind  of  thing  is  possible  in  its  nature, 
and  we  have  seen  that  most  commercial  sales  are  legal  (p.  21, 
and  Chap.  III.).  Chapter  IV.  shows  that  all  persons  can  sell 
or  buy  except  minors,  lunatics,  idiots,  and  married  women, 
and  even  they  under  certain  circumstances.  There  must  be 
assent;  i.e.,  there  can  be  no  selling  without  a  buying,  no  sale 
without  a  purchaser  (Chap.  V.).  The  consideration  is  the 
agreement  made  by  the  buyer  to  pay  for  what  he  buys 
(Chap.  VI. ;  see  also  p.  91,  sec.  12).  Fraud  in  any  part 
of  the  transaction  gives  the  defrauded  party  his  option  to 
treat  it  as  a  sale  or  not  as  he  sees  fit  (Chap.  VII.).  Final- 
ly, if  the  price  be  over  a  certain  amount  there  must  be 
either  (1)  a  writing,  or  (2)  a  delivery  and  acceptance  of  part, 
or  (3)  part-payment  (Chap.  VIII.). 

7.  Existence. — PROPERTY  TO  BE  SOLD  MUST  BE  IN  EX- 
ISTENCE.    Thus,  if  A  sells  a  horse  to  B,  and,  unknown  to 
either,  the  horse  had  died  before  the  sale,  even  though  only 
a  moment  before,  the  whole  contract  would  be  null.     If  B 
had  paid  the  price  he  must  receive  it  back.     But  one  may 


Sale  of  Goods. 


agree  to  buy  or  sell  what  is  not  now  in  existence,  such  as 
the  fruit  to  grow  on  certain  trees,  or  certain  articles  to  be 
manufactured.  Suppose  an  article  to  be  manufactured 
should  be  paid  for  in  advance,  and  then  should  be  lost  or 
destroyed  before  it  was  quite  finished:  the  manufacturer 
would  have  to  bear  the  loss,  because  it  was  still  his,  and 
the  buyer  would  be  entitled  to  another  article  or  to  receive 
back  the  money  he  had  advanced. 

8.  Sale   without   Ownership. — If   one   attempts  to  sell 
what  he  does  not  own  there  is  no  sale;  i.e.,  no  one  can 
claim  a  thing  because  he  bought  and  paid  for  it,  unless  he 
bought  it  from  the  owner.     THE  TRUE  OWNER  OF  PROP- 
ERTY  CAN    CLAIM    IT    AT    ANY   TIME,    AND    IN   WHOSEVER 

HANDS  HE  FINDS  IT.  This  rule  becomes  important  when 
stolen  or  found  property  is  sold  in  the  market.  It  makes 
no  difference  that  the  article  is  delivered,  or  that  both  par- 
ties believe  that  the  seller  is  the  owner,  or  how  many  hands 
it  has  passed  through  since  it  left  the  real  owner's  posses- 
sion. Buyers  therefore  must  always  take  this  risk,  for  it 
is  unjust  that  the  true  owner  should  be  deprived  of  his 
property  without  his  fault  or  consent.* 

9.  Exception. — The  rule  of  the  preceding  section  applies 
to  all  kinds  of  property,  with  two  very  important  excep- 
tions,   viz.,   money  and    negotiable    securities  payable    to 
~bearer.\    WHOEVER  OBTAINS  MONEY  OR  NEGOTIABLE  SE- 
CURITIES  PAYABLE  TO   BEARER   (1)  BEFORE  THEY  BECOME 
DUE,  AND  (2)  GIVES   SOMETHING   IN   CONSIDERATION,  AND 

*  But  one  may  agree  to  sell  what  he  does  not  own.  A  sale,  pay- 
ment to  be  made  on  delivery,  is  a  conditional  sale. 

f  For  the  kinds  of  money  see  p.  145.  Negotiable  securities  include 
promissory  notes,  drafts,  bills  of  exchange,  checks,  bonds  of  the 
National  and  State  Governments,  of  cities,  towns,  etc.,  of  railroads 
and  other  corporations,  and  some  other  securities.  They  only  have 
the  quality  described  in  sec.  9  when  made  payable  to  the  bearer. 
See  also  pp.  107-111  for  meaning  of  negotiable  and  payable  to  bearer. 


90  Particular  Cases. 

(3)  HAS  NO  REASON  TO  SUSPECT  THAT  THE  ONE  FROM 
WHOM  HE  OBTAINS  THEM  HAS  NOT  THE  FULL  EIGHT  TO 
TRANSFER  THEM,  OBTAINS  THE  SAME  RIGHT  TO  THEM 
THAT  HE  WOULD  IF  THE  OTHER  PARTY  WERE  THE  REAL 

OWNER.  In  other  words,  possession  in  this  case  is  suffi- 
cient evidence  of  ownership.  The  buyer  can  buy  from 
one  not  an  owner.  The  reason  for  this  exception  is  the 
benefit  of  trade.  Money  and  commercial  securities  are 
passing  daily  from  hand  to  hand,  and  are  of  great  conven- 
ience. If,  whenever  any  were  offered  to  a  person,  ne  was 
obliged  to  stop  and  learn  whether  the  party  had  the  right 
to  sell,  it  would  greatly  limit  trade.  But  under  any  other 
conditions  than  the  three  stated  the  buyer  does  not  deserve 
to  be  protected. 

10.  Illustrations. — If  a  thief  steals  a  watch  and  sells  it 
to  a  jeweler  or  pawns  it  to  a  pawnbroker,  the  true  owner  is 
entitled  to  it  without  reimbursing  the  jeweler  or  the  pawn- 
broker, even  though  they  were  ignorant  of  the  theft.    But 
where  a  thief  spends  stolen  money  or  sells  a  stolen  bond 
payable  to  bearer,  the  one  receiving  them  may  keep  them 
and  the  original  owner  must  suffer  the  loss.     If,  however, 
a  thief  gave  stolen  money  to  a  friend,  the  latter  could  not 
keep  it.     If  a  security  were  overdue,  no  one  could  deprive 
the  true  owner  of  it.     If  a  banker  buying  such  securities 
had  reason  to  suspect  they  were  stolen,   the  true  owner 
could  take  them  without   reimbursing  him.     Thus,  if  a 
bond  should  be  offered  to  him  for  $40  which  he  knew  was 
worth  $70  in  the  market,  this  would  be  so  suspicious  a  cir- 
cumstance that  he  would  not  be  protected  in  buying  it. 

' Note  to  Teacher. — These  illustrations  could  profitably  be  multiplied 
to  almost  any  extent.  Cases,  such  as  might  arise,  with  differing 
circumstances,  might  be  supposed  and  the  scholar  required  to 
tell  to  whom  the  property  should  belong  and  upon  whom  the  loss 
in  each  case  must  fall. 

11.  Particular  Property. — A  sale  must  refer  to  particu- 


Sale  of  Goods.  91 


lar  property  (that  house,  or  those  goods),  or  it  is  only  an 
agreement  to  sell  or  buy.  Thus,  if  i  order  five  pieces  of 
cloth,  the  cloth  does  not  become  mine  until  the  particular 
five  pieces  have  been  selected.  THE  SALE  is  NOT  COM- 
PLETE UNLESS  PARTICULAR  PROPERTY  IS  REFERRED  TO, 

OR  SET  APART.  If  no  particular  property  is  designated 
the  contract  is  an  agreement  to  sell. 

12.  Price. — AN    AGREEMENT   TO    PAY    MONEY    is    A 
NECESSARY  ELEMENT  OF  A  SALE.*     The  exchange  of  cer- 
tain property  for  other  property  is  barter,  and  is  not  sub- 
ject to  the  rules  of  a  sale.     But  it  is  not  necessary  that  a 
price  should  be  agreed  upon,  for  IN  EVERY  SALE  WHERE 

THE  PRICE  IS  NOT  FIXED  THERE  IS  AN  IMPLIED  AGREE- 
MENT THAT  THE  BUYER  SHALL  PAY  WHAT  THE  GOODS 

ARE  REASONABLY  WORTH.  When  nothing  is  said  as  to 
the  time  of  payment,  payment  is  due  immediately.  If  the 
agreement  is  that  it  shall  be  paid  for  at  some  future  time, 
the  sale  is  said  to  be  on  credit. 

13.  Sale  of  Debts. — Like  other  property  a  claim  upon  a 
debtor  may  be  sold  by  a  creditor.     Thus  if  A  owes  B  $50, 
B  may  sell  the  debt  to  C.     C  should  then  give  notice  of 
the  sale  to  A,  for  if  A,  before  receiving  such  notice,  should 
pay  B  and  B  should  receive  it,  the  debt  would   be  dis- 
charged.    A  claim  thus  sold  is  subject  to  the  same  condi- 
tions in  the  hands  of  a  purchaser  as  in  the  hands  of  the 
seller.     Thus,  if  A  owes  B  $50  for  money  borrowed,  and  B 
owes  A  $50  for  services  rendered,  they  could  be  set  off 
against  each  other;  and  if  C  should  buy  one  of  the  claims 
he  would  get  nothing.     But  if  the  debt  is  represented  by 
a  note,  draft,  or  other  negotiable  paper,  it  may  sometimes 
be  sold  without  being  subject  to  the  same  conditions.    This 
will  be  explained  later  (pp.  108-11T  and  p.  131). 

*  Though,  as  we  have  seen  (sec.  2),  the  payment  itself  is  not  esseii 
tial  to  make  the  goods  the  property  of  the  buyer. 


Particular  Cases. 


REQUISITES  OF 


I.  A  SALE; 


C  I.  That  it  be  a  BINDING  CONTRACT;  to  this  the  following  are 
necessary,  viz., 

[  I.  If  price  is  under  a  certain  amount; 

a.  The  first  six  requisites  of  a  binding  con- 
tract.    (See  Chap.  II.) 
I II.  If  over  that  amount; 

!a.  The  first  six  requisites  of  a  binding 
contract,  and 
b.  The  seventh  requisite,  viz.,  either 
{1.  A  writing, 
2.  Delivery  and  acceptance  of 
part,  or 
3.  Part-payment. 

II.  That,  the  property  EXIST; 

III.  That  it  be  OWNED  BY  SELLER; 

except  in  case  of 

1.  MONEY,  and 

2.  NEGOTIABLE  SECURITIES  PAYABLE  TO  BEARER 

IV.  That  it  contemplate  PARTICULAR  PROPERTY; 

V.  That  the  consideration  be  MONEY. 


II.  AN  AGREEMENT  TO  SELL; 

I.  That  it  be  a  BINDING  CONTRACT;  to  this  the  following  are 

necessary,  viz., 

I.  If  price  is  under  a  certain  amount, 

a.  The  first  six  requisites. 

II.  If  over  that  amount; 

I  a.  The  first  six  requisites,  and 
\  b.  The  seventh,  viz.,  either 

f  1.  A  writing, 

I  2.  Delivery^and  acceptance  of 
part,  or 

[8.  Part -payment. 

II.  That  the  consideration  be  MONEY.  " 


Sale  of  Goods. 


CHAPTER  XIX. 

INCIDENTS   OF  A   SALE. 

1.  Incidents. — We  have  considered   in    the  preceding 
chapter  the  things  essential  to  a  sale,  i.e.,  a  change  of 
ownership;  we  will  now  consider    those  incidental,  i.e., 
those  which  usually  or  often  accompany  a  sale  of  goods. 

2.  Delivery  is  NOT  ESSENTIAL  TO  A  SALE,  AS  BETWEEN 

THE  PARTIES,  BUT  IT  IS   AS   TO   THIRD   PARTIES.       In    other 

words,  the  property  becomes  the  buyer's,  in  general, 
whether  it  is  delivered  to  him  or  not,  but  if  on  account 
of  its  not  being  delivered  to  him  others  are  led  to  believe 
it  still  belongs  to  the  seller  it  will  be  so  considered.  As  to 
them  the  non-delivery  is  fraud.  Thus  suppose  A  should 
sell  to  B,  but  keep  the  goods,  and  then  pretending  they 
were  his  should  sell  them  to  C:  if  now  B  could  claim 
them  as  his  C  would  be  defrauded.  Therefore  the  first 
sale  is  void  and  the  second  one  valid.  A,  however,  must 
answer  to  B,  if  B  is  defrauded. 

3.  Seller's  Lien.  —In  an  ordinary  sale,  where   there  is 
nothing  said  as  to  when  payment  or   delivery  is  to  be 
made,  the  parties  are  supposed  to  contemplate  that  both 
shall  be  immediate.     A  BUYER  HAS  THE  RIGHT  TO  TAKE 

THE    GOODS    WHEN    HE    PAYS    FOR   THEM    BUT    NOT    UNTIL 

THEN.  This  right  of  the  seller  to  keep  the  goods  until 
paid  is  called  his  lien  (pronounced  lee'-en).  But  the  right 
is  lost  as  soon  as  he  delivers  them.  When,  however,  the 
sale  is  on  credit,  there  is  no  such  right,  for  such  a  sale 
implies  that  the  buyer  is  to  have  the  goods  immediately 
and  be  trusted  for  the  price.  Parties  may  make  any 
agreement  they  choose,  and  it  is  very  common  for  mer- 


94  Particular  Cases. 

chants  to  surrender  this  lien,  by  delivering  the  goods 
without  payment.  They  can  then  only  sue  for  the  price. 

4.  What  is  Delivery. — As  may  be  inferred  from  the  last 
two  sections,  it  is  sometimes  quite  important  to  know  just 
the  point  of  time  when  an  article  can  be  considered  de- 
livered.    It  is  delivered  legally  the  moment  it  comes  under 
the  buyer's  control,  or  the  control  of  his  agent,  but  not 
until   then.     Thus  if  a  merchant  sends  his  own  carman 
after  goods  he  has  bought,  delivery  to  the  carman  is  de- 
livery to  the  merchant.     So  if  one  orders  goods  from  a 
distance,  to  be  sent  by  railroad,  he  makes  the  railroad  com- 
pany his  agent  to  receive  them  and  delivery  to  it  is  de- 
livery to  him.     Sometimes  an  act  symbolical  of  delivery  is 
enough,  as  where  one   delivers   to  another  the  key  of  a 
room  where  goods  are  stored,  with  the  understanding  that 
they  shall  be  considered  as  delivered.* 

5.  Right  of  Stoppage. — We  have  seen  that  when  a  mer- 
chant has  sent  goods  by  railroad  to  a  customer,  they  are 
delivered  and  he  has  lost  his  right  to  keep  them  until  paid. 
If  now  the  buyer   should  fail   before  they  reached   him 
still  they  would  be  his  even  although  while  they  were  on 
the  way  both  parties  knew  he  would  be  unable  to  pay  for 
them.     This  seems  a  harsh  rule  and  therefore  there  is  this 
exception:  IF  BEFORE  GOODS  SOLD  ON  CREDIT  REACH  THE 

BUYER  THE  SELLER  HEARS  OF  HIS  FAILURE  AND  ORDERS 
THE  CARRIER  f  NOT  TO  DELIVER  THEM,  THE  SELLER  MAY 
RETAKE  THEM  AND  HOLD  THEM  UNTIL  PAID.  This  is 

in  effect  an  extension  of  the  seller's  lien. 

*  Throughout  this  chapter  we  use  the  word  "deliver"  in  the 
legal  sense  of  "give  up  the  possession  of."  It  sometimes  has  the 
popular  meaning  of  sending  to  the  house  or  store  of  the  buyer.  In 
this  sense  there  is  no  obligation  on  the  seller  to  deliver  unless  he 
agrees  to.  A  buyer  must  take  away  his  own  property. 

f  See  p.  159  for  meaning  of  carrier. 


Sale  of  Goods.  95 


6.  Warranty  of  Ownership.  —  IN  EVERY  SALE  OF  PER- 
SONAL   PROPERTY    THERE    IS    AN   IMPLIED    WARRANTY   OF 

OWNERSHIP.  This  means  that  if  one  sells  as  his  own, 
what  afterwards  turns  out  to  be  another's,  he  impliedly 
agrees  to  reimburse  the  buyer  if  the  real  owner  recovers  his 
property.  (See  p.  89,  sec.  8.)  This  is  so  whether  anything 
is  said  upon  the  subject  or  not.  Thus  in  the  illustration 
on  page  90,  if  the  true  owner  of  the  watch  recovers  it  from 
the  jeweler,  the  latter  has  a  claim  upon  the  thief.  If  I, 
holding  goods  as  a  pledge,  give  them  to  a  broker  to  sell,  and 
he  sells  them  to  you  as  my  own,  and  the  true  owner  takes 
them  from  you,  I  must  pay  you  your  loss. 

Note  to  Teacher. — The  relations  of  this  rule  to  the  one  on  p.  89,  sec. 
8,  should  be  carefully  marked.  This  applies  to  all  kinds  of  per- 
sonal property,  negotiable  or  otherwise. 

7.  Warranty  of  Quality. — If  on  a  sale  the  seller  warrants 
(or  guarantees)  *  that  the  article  is  of  a  certain  quality  or  is 
suited  to  a  certain  purpose,  and  it  turns  out  Differently,  he 
must  suffer  the  loss,  for  it  was  his  agreement.     BUT  IF 

THERE  WAS  NO  EXPRESS  AGREEMENT  AS  TO  QUALITY  OR 
FITNESS,  THE  BUYER  MUST  TAKE  THE  RISK,  for  none  is  im- 
plied. He  must  keep  the  goods,  and  suffer  the  loss  if  there 
is  any.  He  has  the  opportunity  to  examine  the  article,  and 
may  refuse  to  buy  -unless  the  seller  will  expressly  warrant. 

But  the  rule  does  not  apply  where  the  buyer  has  no  op- 
portunity to  inspect  the  articles  before  buying.  Thus  in  a 
sale  where  he  only  sees  a  sample,  or  where  the  goods  are  to 
arrive  by  vessel,  and  are  still  at  sea,  there  is  always  an  im- 
plied warranty  that  they  will  be  like  the  sample,  or  as 
represented.  Nor  does  the  rule  apply  so  as  to  protect  one 
from  the  consequences  of  his  own  fraud. 

*  Guarantee  is  perhaps  more  commonly  used  than  warrant  in  this 
sense.  But  it  should  be  distinguished  from  the  sense  of  answering 
for  aiiotJier  (p.  76).  Here  he  answers  for  himself,  or  his  own  goods. 


96  Particular  Cases. 

CHAPTER  XX. 

COMMISSION   MERCHANTS. 

1.  Definition. — A  commission  merchant   (also  called  a 
factor)  is  one  employed  to  sell  for  another  the  goods  sent 
him  by  the  other  for  sale,  and  which  are  often  manufac- 
tured or  raised  by  the  latter.     Farmers  and  manufacturers 
who  have  large  quantities  of  material  to  sell  in  the  market, 
find  it  best  to  send  it  to  the  cities,  to  the  commission  mer- 
chants who  sell  it  for  them,  and  charge  for  the  service  a 
percentage  on  the  price  (called  a  commission).     Therefore 

COMMISSION    MERCHANTS    ARE    AGENTS    TO    SELL,    and    the 

owners  of  the  goods  are  their  principals.  Their  duties, 
powers  and  responsibilities  are  in  general  like  those  of  any 
agents  (Chaps.  X.,  XL,  XII.),  and  we  will  therefore  only 
speak  of  a  few  rules  which  are  peculiar  to  the  relation.* 

2.  Duties. — As  between  a  commission  merchant  and  his 
principal,  the  whole  matter  is  one  entirely  of  contract,  the 
contract  being  one  for  personal  services  (Chap.  XXVIIL). 
His  great  duty  is  to  sell  the  goods  for  the  best  price  he  can 
get,  and  pay  over  the  money,   when  collected,  deducting 
his  commission.     In  doing  this  he  must,  like  all  agents, 
obey  the  instructions  of  his  principal,  conduct  the  business 
skillfully  and  carefully  (e.g.,  not  sell  to  one  he  knows  can- 
not pay),  render  true  accounts  when  called  upon,  and  not 
make  his  own  interests  adverse  to  those  of  his  principal 
(p.  54). 

*  Sometimes  one  acts  as  the  agent  of  only  one  manufacturer, 
sometimes  for  a  large  number  at  the  same  time.  Some  also  combine 
a  commission  business  with  a  trade  of  their  own,  and  sell  some 
goods  as  principals  and  some  as  agents.  "We  must  always  be  care- 
ful to  distinguish  the  character  in  which  a  person  acts. 


Sale  of  Goods.  97 


3.  Powers. — These  are  also  such  as  are  agreed  upon,  but 
very  often  there  is  no  special  arrangement,  and  the  com- 
mission merchant  is  left  to  conduct  the  business  according 
to  his  own  judgment,  and  in  the  way  a  commission  busi- 
ness is  usually  conducted.     In  such  case  he  has  all  the  pow- 
ers necessarily  or  usually  exercised  in  the  business.     He 
may  act  according  to  the  general  custom  of  the  trade,  for 
any  one  employing  him  is  presumed  to  know  such  custom 
(p.  32). 

4.  Responsibility  to  Principal. — He  is  responsible  to  his 
principal  for  any  loss   occasioned  by  his  violating  their 
agreement,  or  disobeying  instructions,  or  acting  negligently. 
If  he  was  left  to  exercise  his  own  judgment,  as,  for  example, 
for  what  price,  or  when,  or  to  whom  he  should  sell,  he  is 
not  responsible  for  any  loss  occasioned  by  his  making  a  mis- 
take, unless  it  was  negligent  or  fraudulent.     Thus  if  he  has 
the  right  to  sell  on  credit,  and  the  buyer- fails  to  pay,  the 
owner  must  lose,  not  the  commission  merchant. 

5.  His  Commission. — A  commission  merchant  is  entitled 
to  his  commission  when  he  has  performed  the  service  for 
which  he  was  employed,  i.e.,  in  general  when  the  sale  has 
been  made.     If  allowed  to  sell  on  credit  he  has  performed 
his  contract,  though  the  buyer  does  not  perform  his,  and 
is  entitled  to  his  commission,  whether  the  buyer  ever  pays 
or  not.     But  if  he  in  any  way  breaks  his  contract,  as  by 
negligence  or  disobedience,  he  loses  his  claim  to  any  com- 
mission on  that  transaction,  no  matter  what  he  has  done. 

6.  Guaranty  Commission. — Sometimes  it  is  made  a  part 
of  the  agreement  between  the  commission  merchant  and 
the  owner,  that  the  former  shall  guarantee  payment  by  the 
ones  to  whom  he  makes  sales.     In  such  case  he  is  responsi- 
ble to  the  owner,  if  the  buyer  does  not  pay.     It  is  a  con- 
tract of   guaranty   (Chap.  XVI.).     He  has   no   different 
authority  from  that  in  the  other  case,  but  the  commission 


98  Particular  Cases. 

charged  is  higher.  That,  however,  is  all  a  matter  of  agree- 
ment. 

7.  Advances. — It  is  quite  common  for  the  commission 
merchant  to  advance  to  the  owner,  before  he  has  made  any 
sale,  some  portion  of  what  they  think  the  goods  are  worth.* 
Then  when  the  sale  is  made,  these  advances  are  deducted 
from  the  amount  of  the  proceeds,  and  are  retained  by  the 
commission  merchant  with  his  commission. 

8.  Lien. — Being  an  agent,  his  authority  can  be  revoked 
at  any  time  (p.  50,  sec.  7),  and  then  the  owner  will  be  en- 
titled to  take  his  goods  away.     But  it  can  be  seen  that  if 
the    commission   merchant  has   meanwhile  incurred  any 
expenses,  or  made  any  advances  on  the  goods,  the  owner 
could,  by  taking  the  goods  away,  deprive  him  of  his  secu- 
rity ;  therefore  A  COMMISSION  MERCHANT  HAS  A  RIGHT  TO 

KEEP  ANY  GOODS  OF  HIS  PRINCIPAL'S  WHICH  ARE  IN  HIS 
HANDS  UNTIL  HE  HAS  BEEN  PAID  ALL  COMMISSIONS,  AD- 
VANCES, AND  EXPENSES,  DUE  TO  HIM  FROM  THE  OWNER. 

This  is  called  a  general  lien  because  he  can  keep  any  goods, 
whether  the  debt  arose  in  connection  with  them  or  with 
others.  Thus,  if  he  earns  a  commission  on  one  sale,  and 
afterwards  other  goods  are  sent  to  him,  he  may  retain  them 
until  paid  the  first  commission.! 

9.  Relation  to  Buyer. — The  relation  and  responsibility 
of  a  commission  merchant  to  those  purchasing  from  him, 
are  the  relation  and  responsibility  of  an  agent  to  the  third 

*This  is  often  done  by  draft  (p.  117).  The  owner  at  the  time  he 
sends  the  goods  to  the  commission  merchant  draws  a  draft  on  him, 
which  the  latter  pays.  This  is  called  "  drawing  on  the  goods."  It 
is  in  effect  a  way  of  lending  money,  and  pledging  the  goods  as 
security  for  the  loan.  It  is  not  a  sale  to  the  commission  merchant. 

f  This  lien  is  a  right  existing  only  between  him  and  the  owner. 
If  a  sale  is  made,  the  buyer  is  of  course  entitled  to  the  goods  he 
buys. 


Sale  of  Goods.  99 


party,  which  have  been  fully  considered  in  Chapter  XII. 
and  need  not  be  repeated  here.  Thus,  if  the  owner  is 
revealed  to  the  buyer,  the  commission  merchant  assumes, 
in  general,  no  responsibility  himself  ;  but  if  he  says  noth- 
ing about  who  owns  the  goods,  or  sells  them  as  his  own, 
acting  as  the  principal,  he  assumes  all  the  responsibilities 
of  a  principal. 


CHAPTER  XXI. 

BROKEKS. 

1.  Definition. — A  broker  is  one  employed  by  the  owner  of 
property  in  the  negotiation  of  certain  contracts  with  refer- 
ence to  it.      A  BROKER  IS  AN  AGENT  TO  MAKE  CONTRACTS. 

If  the  property  is  merchandise,  and  the  contract  he  is  em- 
ployed to  make  is  a  sale,  he  is  called  a  merchandise  broker. 
This  kind  of  a  broker  is  much  like  a  commission  merchant, 
the  difference  being  only  that  the  former  does  not  have 
possession  of  the  property,  while  the  latter  does.  A  broker 
therefore  has  no  lien  on  the  property,  for  a  lien  is  a  right 
to  keep* 

2.  Kinds. — Besides  merchandise  brokers  there  are  many 
other  kinds,  and  therefore  the  term  "broker"  is  a  broader 
and  more  indefinite  term  than  "commission  merchant." 
There  are  Mil  and  note  brokers,  who  buy  and  sell  for  others 
drafts,  bills  and  notes  ;   real  estate  brokers,  who  buy  and 
sell  real  estate  or  mortgages  on  real  estate,  for  others ; 

*  When  a  merchandise  broker  sells  goods,  he  makes  out  two  papers, 
one  for  the  seller  and  the  other  for  the  buyer,  and  delivers  them  to 
the  respective  parties.  The  two  papers  taken  together  make  a  writ- 
ten contract  of  sale  (form  22). 


100  Particular  Gases. 

stock  brokers,  who  buy  and  sell  for  others  the  stock  and 
bonds  of  States,  railroads,  etc.;  insurance  brokers,  who  act 
for  the  owners  of  property  in  obtaining  insurance  upon  it, 
in  settling  losses,  etc. ;  and  several  other  kinds. 

3.  Responsibility  to   Principal. — The  contract  between 
the  broker  and  the  owner  of  the  property  for  whom  he  acts 
is  one  of  personal  service,  like  all  contracts  of  agency,  and 
we  need  not  here  rehearse  the  general  duties  attending 
such  a  contract  (p.  54).      In  order  to  understand  all  the 
duties  assumed  by  a  contract  in  brokerage,  as  well  as  in  any 
kind  of  business,  one  must  know  all  the  general  customs 
of  that  business,  for  unless  the  agreement  makes  particular 
specification    of  what    is  and  is  not  to  be    done,  those 
customs  must  be  followed.     They  are  in  effect  laws.     This 
shows  how  necessary  it  is  for  any  one  to  understand  his 
business,  for  he  may  be  assuming  responsibilities  that  he 
has  no  idea  of. 

4.  Relation  to  Third  Party. — Here  the  rules  of  Chapter 
XII.    are  again   applicable.     Some   kinds   of    brokers  act 
wholly  as  agents  and  reveal  the  names  of  their  principals, 
and  therefore  are  not  themselves  responsible  for  any  author- 
ized and  honest  act :  others  do  not  mention  their  principals, 
and  therefore  are,  so  far  as  third  parties  are  concerned,  the 
real  principals  themselves.      So  also  many  combine  a  bro- 
kerage business  with  an  individual  business,  but  these  rules 
only  apply  to  them  as  brokers. 


Sale  of  Goods.  101 


SUMMARY  OF  LEADING  RULES  OF  SALE  OF  GOODS. 

I.  KEQUISITES  OF  A  SALE. 

1.  A  SALE  is  an  agreement  to  exchange  property  for 
money. 

2.  Being  a  contract,  a  sale  must  have  all  the  requisites 

of  a  BINDING  CONTRACT. 

3..  Property,  to  be  sold,  must  be  IN  EXISTENCE. 

4.  It  must  BELONG  to  the  seller:  the  true  owner  of  prop- 
erty can  claim  it  at  any  time  and  in  whosever  hands  he 
finds  it. 

5.  Except  MONEY  AND  NEGOTIABLE  SECURITIES  payable 
to  bearer:  whoever  obtains  them  (1)  before  they  become 
due,  and  (2)  gives  something  in  consideration,  and  (3)  has 
no  reason  to  suspect  that  the  one  from  whom  he  obtains 
them  has  not  the  full  right  to  transfer  them,  obtains  the 
same  right  to  them  that  he  would  if  the  other  party  were 
the  real  owner. 

6.  A  sale  is  not  complete  unless  PAKTICULAR  PROPERTY 
is  referred  to  or  set  apart. 

7.  An  agreement  to  pay  MONEY  is  a  necessary  element 
of  a  sale. 

8.  In  every  sale  where  the  price  is  not  fixed  there  is  an 
IMPLIED  AGREEMENT  that  the  buyer  shall  pay  what  the 
goods  are  reasonably  worth. 


II.  INCIDENTS  OF  A  SALE. 

1.  DELIVERY  is  not  essential  to  a  sale  as  between  the 
parties,  but  it  is  as  to  third  parties. 

2.  A  buyer  has  the  RIGHT  TO  TAKE  the  goods  when  he 
pays  for  them,  but  not  until  then. 


102  Particular  Cases. 

3.  If,  before  the  goods  sold  on  credit  reach  the  buyer, 
the  seller  hears  of  his  FAILURE  and  orders  the  carrier  not 
to  deliver  them,  the  seller  may  retake  them  and  hold  them 
until  paid. 

4.  In  every  sale  of  personal  property  there  is  an  implied 

WARRANTY   OF   OWNERSHIP. 

5.  If  there  was  no  express  agreement  as  to  QUALITY  OR 
FITNESS  the  buyer  must  take  the  risk. 

III.  COMMISSION  MERCHANTS. 

1.  Commission  merchants  are  AGENTS  TO  SELL  goods. 

2.  A  commission  merchant  has  a  RIGHT  TO  KEEP  any 
goods  of  his  principal's  which  are  in  his  hands,  until  he  has 
been  paid  all  commissions,  advances,  and  expenses,  due  to 
him  from  the  owner. 

IV.  BROKERS. 
A  broker  is  an  AGENT  TO  MAKE  CONTRACTS. 


Review  Questions.  103 


REVIEW    QUESTIONS. 
Sale   of  Goods. 

1.  What  is  a  sale?    Is  it  a  contract?    State  the  difference  between 

a  sale  and  an  agreement  to  sell.  What  is  title?  Do  possession 
and  ownership  always  go  together  ?  Is  a  sale  complete  until 
the  goods  are  delivered?  Or  until  paid  for?  At  what  mo- 
ment is  it  complete?  What  is  a  conditional  sale?  Show 
when  and  why  it  is  important  to  know  the  moment  a  sale  is 
complete. 

2.  State  the  five  things  necessary  in  every  sale.     Take  in  order  the 

seven  requisites  of  a  binding  contract,  and  show  how  each  one 
applies  to  the  case  of  sales. 

3.  May  one  agree  to  buy  a  thing  which  does  not  now  exist,  but  is  to 

grow,  or  to  be  made? 

4.  If  one  sells  property  which  he  does  not  own,  or  which  he  has  no 

right  to  sell,  will  the  purchaser  or  the  real  owner  be  entitled  to 
keep  the  property?  Can  one  be  deprived  of  his  property 
without  his  consent?  State  the  rule  in  this  respect,  as  to  ne- 
gotiable securities.  What  are  negotiable  securities? 

5.  If  something  is  ordered,  but  no  particular  article  of  the  kind  is 

designated,  is  there  a  sale?  If  something  is  ordered  and  a 
particular  article  is  afterwards  set  apart  in  accordance  with 
the  order,  but  is  destroyed  before  being  delivered,  whose  is  the 
loss? 

6.  Must  a  particular  price  be  mentioned  to  make  a  sale? 

7.  What  is  the  difference  between  sale  and  barter? 

8.  What  is  the  sale  of  a  debt? 

9.  What  is  the  difference  between  a  requisite  and  an  incident  of  a 

sale? 

10.  Does  property  sold  ever  become  the  buyer's  before  it  is  delivered 

to  him? 

11.  In  what  case  (if  any)  is  delivery  necessary  to  make  the  property 

the  buyer's?    Why? 

12.  When  has  the  seller  a  right  to  keep  the  property?     How  long 

may  he?  What  is  the  right  called?  Has  he  this  right  when 
he  sells  on  credit? 


104  Particular  Cases. 

13.  What  is  delivery  in  law?      Is  there  any  obligation  upon  a  mer- 

chant to  send  goods  to  the  buyer  when  he  does  not  agree  to  ? 

14.  Describe  the  right  of  stoppage. 

15.  What  is  warranty  of  ownership?    When  does  it  exist? 

16.  What  is  warranty  of  quality?    When  does  it  exist? 

17.  What  is  the  implied  warranty  in  a  sale  by  sample? 

18.  What  is  a  commission  merchant?     Who  is  his  principal?     Who 

owns  the  goods,  the  commission  merchant  or  the  principal? 

19.  State  the  general  duties  of  a  commission  merchant  to  his  prin 

cipal. 

20.  What  powers,  in  general,  has  he? 

21.  Where  the  custom  of  the  trade  and  his  special  instructions  dif- 

fer, which  must  he  follow? 

22.  When  is  a  commission  merchant  personally  responsible  to  his 

principal  for  what  the  goods  are  sold  for? 

23.  How  is  a  commission  merchant  paid  for  his  services?     If  he  has 

sold  the  goods,  but  the  buyer  fails  to  pay,  is  he  entitled  to  his 
commission? 

24.  What  are  "advances,"  made  by  a  commission  merchant? 

25.  When  may  a  commission  merchant  keep  the  goods  from  one  who 

has  bought  them  of  him?     May  he  ever  keep  them  from  Ms 
principal  if  the  latter  demands  them? 

26.  What  is  his  "  lien"?     To  what  property  of  the  principal's  does 

it  extend  ?    What  does  it  secure? 

27.  What  is  the  position  of  a  commission  merchant  who  does  not  reveal 

his  principal  ? 

28.  Define  broker.     Name  the  different  kinds.     What  is  the  differ- 

ence between  a  commission    merchant  and  a  merchandise 
broker? 


DIVISION  II. 
COMMERCIAL  PAPEK. 


CHAPTER  XXII. 

NOTES. 

«. — Description  of  Notes. 

1.  Commercial   Paper  consists   chiefly  of   three  kinds, 
notes,  drafts  and  checks.     It  is  so  called  because  it  is  so  ex- 
tensively used  for  the  purposes  of  business;  commerce  mean- 
ing in  one  sense  all  kinds  of  traffic,  on  land  as  well  as  by 
sea.     Many  of  the  rules  stated  in  this  chapter,  especially 
those  which  relate  to  negotiability  (sec.  8  to  27)  are  common 
to  all  kinds  of  commercial  paper. 

2.  A  Note  IS  A  WRITTEN  PROMISE,  SIGNED    BY   THE    PER- 
SON PROMISING,  TO  PAY  A  CERTAIN  SUM    OF    MONEY,  AT  A 
CERTAIN  TIME,  TO  A  PERSON  NAMED,  OR  TO  HIS  ORDER,  OR 

TO  THE  BEARER.*     It  is  thus  a  written  contract.    The  fol- 
lowing is  a  common  form: 


s 


*  The  word  note,  as  we  use  it  in  this   book,  means  the  same  as 
promissory  note. 


106  Particular  Cases. 

The  person  promising  is  called  the  maker,  and  the  per- 
son named  in  the  body  of  the  note  is  called  the  payee. 
Thus  in  the  above,  the  firm  of  Archibald  Brothers  are  the 
makers,  and  Fay  is  the  payee.  The  words  value  received 
are  not  generally  necessary. 

3.  Use. — Notes  are  of  very  common  use,  and  of  great 
utility  in  business.     Their  use  is,  as  clear  and  certain  evi- 
dence of  debt.     In  modern  times  a  large  part  of  trade  is 
carried  on  on  credit,  i.e.,  a  tradesman,  instead  of  paying  for 
his  stock  when  he  buys,  promises  to  pay  at  a  certain  future 
time.      Now  that  debt,  that  promise,    whether   oral   or 
written,  is  itself  property,  and  may  be  transferred  from  one 
to  another,  but  in  order  for  that,  there  must  be  distinct  and 
unmistakable  evidence  of  its  existence,   such  as  any  one 
could  rely  upon.     A  note,  being  the  written  and  uncondi- 
tional admission  of  the  debtor  himself,  is  such  evidence. 
Thus  notes  facilitate  the  use  of  credit,  which  has  been  a 
mighty  factor  in  the  extension  of  commerce. 

4.  Two  Kinds.— At  pp.  275-277  will  be  found  the  most 
common  forms  of  notes.     The  most  important  particular 
in  which  they  differ  in  kind  is  with  regard  to  the  payee 
named,  and  in  this  respect  there  are  four  kinds  :  those 
payable,  (a)  to  a  particular  person  or  his  order,  (b)  to  the 
maker  himself  or  his  order,*  (c)  to  a  particular  person 
or  bearer,  and  (d)  to  the  bearer,     (a)  and  (b)  are  substan- 
tially the  same,  for  when  the  maker  makes  a  note  in  the 
form  of  (b)  he  at  the  same  time  indorses  it  and  thus  makes 
it  payable  either  to  a  particular  person  or  to  the  bearer  as  he 
chooses  (sec.  23).    (c)  and  (d)  are  also  the  same,  for  in  each 
case  the  promise  is  to  pay  any  one  who  may  "bear,"  i.e., 

*  "  To  the  order  of  A"  means  exactly  the  same  as  "  to  A  or  order," 
and  both  mean  that  the  maker  will  pay  it  to  whomsoever  A  orders 
him  to  pay  it. 


Commercial  Paper.  107 

own  or  hold  the  note  when  it  is  presented  for  payment. 
The  name  of  the  person  in  (c)  has  no  effect  whatever. 
Therefore,  THERE  ARE  TWO  KINDS  OF  NOTES,  THOSE  PAY- 
ABLE (1)  TO  ORDER,  AND  (2)  TO  BEARER.  So  also,  there 
are  the  same  two  kinds  of  drafts  or  checks. 

5.  When  Due. — The  day  of  payment  is  often  called  the 
day  of  maturity.    A  NOTE  PAYABLE  AT  A  FUTURE  TIME  is 

NOT  DUE  UNTIL  THE  THIRD  DAY    AFTER  ITS  SPECIFIED  DAY 

OF  PAYMENT.  That  is,  an  old  and  universal  custom  ex- 
tends the  time  three  days.  These  are  called  days  of  grace. 
If  payable  a  number  of  months  from  date  it  becomes  due 
the  third  day  after  the  corresponding  day  in  the  proper 
month.  Thus  a  note,  dated  Jan.  1  and  payable  ten  days 
from  date,  is  due  Jan.  14  ;  the  note  in  sec.  2  (p.  105)  is  due 
Nov.  5.  Whenever  the  last  day  of  grace  falls  upon  a  Sun- 
day or  a  legal  holiday,*  the  note  is  due  the  day  before.  A 
note  payable  on  demand  is  due  immediately  and  has  no 
days  of  grace.  One  specifying  no  time  of  payment  is  due 
on  demand,  f 

Note  to  Teacher. — It  is  important  to  know  the  exact  day  a  note  is 
due.  Draw  up  different  forms,  and  ask  the  scholar  when  they 
become  due. 

b. — Negotiability. 

6.  Maker's    Responsibility. — Notes  are  very  frequently 
transferred  by  the  payees  to  others.     Many  are  made  to  be 
transferred.  J     There  are  therefore  two  classes  of  persons  to 
whom  a  maker  may  become  responsible,   (1)  the  person 
originally  receiving  the  note,  and  (2)  the  persons  to  whom 

*  The  legal  holidays  are  in  general  Jan.  1,  Feb.  22,  July  4,  Dec. 
25,  and  Thanksgiving  Day,  with  some  others  in  different  States. 

t  But  parties  may  exclude  days  of  grace  by  adding  to  the  note  the 
words  "  without  grace." 

t  See  p.  110,  sec.  11. 


108  Particular  Cases. 

it  is  subsequently  transferred.  These  often  stand  in  differ- 
ent positions  with  regard  to  the  note,  and  therefore  the 
maker  may  sometimes  be  responsible  to  one  party  when  he 
would  not  be  to  another.  When  it  is  transferred,  those 
transferring  it  themselves  also  often  assume  responsibility 
to  pay  it.  The  contracts  of  subsequent  parties  will  be 
treated  in  a  later  chapter  (Chap.  XXV.).  This  chapter 
relates  simply  to  the  maker's  contract. 

7.  Not  Transferred. — If  a  note  remains  the  property  of 
the  payee,  or  in  a  bearer  note  of  the  person  to  whom  it  is 
originally  given,  until  it  becomes  due,  those  two,  the  maker 
and  himself,  are  the  only  ones  concerned  in  the  whole  trans- 
action, and  each  has  full  knowledge  of  it.     Therefore  there 
is  no  reason  why  the  contract  should  not  follow  the  rules 
of  other  contracts,  and  it  does.     IN  THE  HANDS  OF  THE 

ORIGINAL  HOLDER  OF  A  NOTE  IT  IS  A  BINDING  CONTRACT 
PROVIDED  IT  HAS  ALL  THE  REQUISITES  OF  A  BINDING  CON- 
TRACT, BUT  NOT  OTHERWISE.  It  is  peculiar  in  no  respect. 
Thus  in  forms  L-6,  if  Fay,  receiving  the  note  from  Arch- 
ibald Brothers,  should  retain  it  until  maturity,  he  could 
enforce  it  only  if  it  represented  a  real,  existing  debt,  such 
as  a  loan,  or  sale,  and  was  not  illegal,  fictitious  or  fraudu- 
lent in  any  way.  As  between  the  original  parties  the  note 
is  but  a  memorandum  or  evidence  of  the  debt. 

8.  But  when  Transferred  to  a  third  party,  this  person 
may  not  know  all  the  details  of  the  original  transaction.  He 
sees  only  the  note,  but  does  not  know  whether  it  represents 
a  legal,  real,  and  honest  debt  or  not.     It  may  be  paid  for 
aught  he  knows.     Therefore  the  law,  in   order  to  protect 
him,  and  thus  allow  notes  to  be  readily  transferred,  changes 
its  character  in  his  hands,  as  it  were,  by  giving  him  the 
right  to  enforce  it  in  any  event.     It  becomes  in  his  hands 
more  than  evidence;  it  becomes  property.     And  it  keeps 
this  character  in  the  hands  of  all  to  whom  it  is  successively 


Commercial  Paper.  109 

transferred  thereafter.  Each  successive  owner  holds  it  in 
his  own  right  and  free  from  its  defects  in  the  hands  of  all 
prior  owners.  Thus  it  is  that  it  is  given  currency,  and 
may  be  bought  without  risk. 

9.  Definition  of  Negotiability. — And  this  character  we 
call  negotiability,  which  may  be  defined  thus :  NEGOTIA- 
BILITY, IN  COMMERCIAL  PAPER,  IS  THE  QUALITY  OF  BEING 
ENFORCEABLE   BY    ONE    RECEIVING    IT,    THOUGH    NOT    EN- 
FORCEABLE   BY    THE    ONE   FROM    WHOM    IT    IS    RECEIVED.* 

It  has  no  effect  on  contracts  originally  valid,  nor  on  invalid 
contracts,  when  retained  by  the  person  originally  receiving 
them.  It  only  makes  invalid  ones  valid  when  transferred. 
Notes  which  have  this  quality  are  called  negotiable  notes. 
There  are  other  instruments  which  also  have  it,  drafts, 
checks,  bonds,  etc.  (p.  89,  note).  The  transfer  of  negotiable 
paper  is  the  transfer  of  the  debt  represented  by  it,  but  it 
differs  from  the  transfer  of  other  debts  in  this  respect:  that 
it  carries  rights  which  the  person  transferring  did  not  have 
(p.  91).  The  effect  of  negotiability  in  different  cases  will 
be  illustrated  in  the  sections  following. 

10.  Its  General  Effect. — This  is,  as  implied  in  its  defini- 
tion, to   make  of  no   consequence  certain   circumstances 
which,  if  the  note  had  not  been  transferred,  would  have 
made  it  void  or  not  collectible.     The  next  step  is  to  exam- 
ine what  those  circumstances  are,  for  there  are  those  which 
will  render  it  void  in  the  hands  of  any  one.     Thus,  if  the 
defect  appears  upon  the  note  itself,  as  for  instance  in  many 
States  a  usurious  note,  it  cannot  become  valid.      So  also 
negotiability  will  not  make  the  note  of  a  minor  enforceable. 

THE  CIRCUMSTANCES  WHICH,  THOUGH  RENDERING  NEGO- 
TIABLE PAPER  VOID  IN  THE  HANDS  OF  ONE  PARTY,  YET 

*  The  word  negotiability  has  had,  and  now  has,  several  different 
meanings,  but  this  is  its  common  legal  sense  at  present. 


110  Particular  Cases. 


DO  NOT  AFFECT  THE  RIGHTS  OF  OTHERS  RECEIVING  IT 
THROUGH  HIM,  ARE,  IN  GENERAL,  THOSE  WHICH  DO  NOT 

APPEAR  ON  THE  INSTRUMENT  ITSELF.  Outside  agreements 
and  circumstances  do  not  affect  it.  This  rule  is  common 
to  all  negotiable  securities.  It  would  be  impossible  to  enu- 
merate all  such  circumstances,  but  we  may  note  four  of  the 
most  common  cases. 

11.  First :  Accommodation  Notes. — These  are  notes  which 
represent  no  real  existing  debt,  but  are  made  as  a  means  of 
borrowing  money.     Thus  A,  willing  to  lend  money  to  B, 
but  not  having  it  at  hand,  may  make  his  note  payable  to  B, 
which  B  may  sell  to  a  bank  or  to  any  one.     In  B's   hands 
the  note  is  without  consideration,  and  therefore  void,  but 
this  absence  of  consideration  does  not  affect  the  liability  of 
A  to  the  bank,  whether  it  is  known  to  be  accommodation 
paper  or  not.     So,  also,  if  the  note  is  fraudulent  or  illegal 
in  its  origin,  nevertheless,  one  who  receives  it  in  ignorance 
of  the  fraud  or  illegality,  may  enforce  it.     These  defects 
do  not  appear  on  the  note  itself.* 

12.  Second:  Payment. — If  paid  or  discharged  before  ma- 
turity the  person  to  whom  it  is  paid  can  make  no  second 
claim  upon  it,  but  should  he  not  be  the  owner  at  the  time, 
or  should  he  retain  it  and  afterwards  transfer  it  to  another 
representing  it  to  be  unpaid,  the  owner  at  its  maturity  could 
again  enforce  payment  from  the  maker.     Therefore  one  on 
paying  a  note  should  insist  that  it  be  surrendered  to  him, 
as  he  has  a  right  to  do.     Any  partial  payment  should  be 
noted  on  it  at  the  time  the  payment  is  made. 

13.  Third:  Set-Off. — We  have  seen  that  ordinary  debts 

*  Negotiable  paper  in  the  hands  of  third  parties,  is,  therefore,  ex- 
cepted  from  the  5th  and  6th  requisites  of  a  binding  contract,  but  not 
from  the  3d  (p.  20).  The  rest  are  not  applicable.  A  promise  to  pay 
money  is  of  course  possible  in  its  nature,  and  almost  always  legal; 
delivery  implies  assent;  and  according  to  its  definition  it  is  written. 


Commercial  Paper,  111 


owed  by  two  parties  to  each  other  offset  and  destroy  one 
another,  but  this  is  not  always  so  with  negotiable  paper  be- 
fore it  is  due.  Thus,  let  us  suppose  a  note  of  A  payable 
to  B  for  $100,  transferred  by  B  to  C,  and  by  C  to  D.  If 
now  at  its  maturity  A  has  also  a  claim  for  $50  against  D, 
it  will  cancel  one  half  of  A's  debt  to  D  upon  his  note. 
But  A  may  have  had  claims  against  B  or  C  during  the  time 
they  owned  the  note,  yet  those  claims  would  not  affect  it 
unless  it  was  owned  by  them  at  maturity. 

14.  Fourth:   Lost  or  Stolen  Paper. — A  negotiable  note 
payable  to  bearer  coming  before  it  is  due  to  one  who  pur- 
chases it  believing  that  the  seller  has  the  right  to  sell  it, 
belongs  to  him,  though  stolen  from  the  true  owner.     We 
have  already  considered  this  rule,  and  the  rule  of  property 
to  which  it  is  an  exception,  in  connection  with  all  kinds  of 
negotiable   securities  (p.  89).     But  it  only  applies  when 
the  security,  either  originally  or  by  blank  indorsement  (p. 
114,  sec.  23)  is  payable  to  bearer.     If  payable  to  the  order 
of  a  particular  person,  he  can  be  deprived  of  it  only  by 
his  own  consent.     The  forgery  of  his  name  would  not  af- 
fect his  rights.     Hence  if  notes,  checks,  etc.,  are  to  be  sent 
by  mail,  or  exposed  to  danger  of  loss,  it  is  prudent  to  have 
them  payable  to  order.     This  is  the  only  one  of  the  effects 
of  negotiability  which  does  not  apply  to  order  and  bearer 
notes  alike. 

c. — Conditions  of  Negotiability. 

15.  Classes  of  Conditions. — Not  all  notes  are  negotiable, 
nor  are  any  so  under  all  circumstances.     Certain  circum- 
stances or  conditions  must  be  present,  or  the  transfer  will 
fall  back  under  the  rule  governing  the  transfer  of  other 
contracts;  i.e.,  one  can  convey  just  the  rights  he  has  and 
no  others.     These  conditions  are  of  five  kinds:  those  re- 
lating (1)  to  its  form,  (2)  to  the  manner  of  its  transfer,  (3) 


112  Particular  Cases. 

to  the  time  of  its  transfer,  (4)  to  the  consideration  for  the 
transfer,  and  (5)  to  the  knowledge  about  it  of  the  person 
receiving  it.  We  will  consider  first  the  necessities  as  to  form. 

16.  Five  Formal  Requisites. — THE  FIVE  THINGS  NECES- 

SAKY  IN  THE  FORM  OF  COMMERCIAL  PAPER  TO  MAKE  IT 
NEGOTIABLE,  ARE  (1)  THAT  THE  DATE  OF  PAYMENT  BE  CER- 
TAIN TO  COME,  (2)  THAT  IT  HAVE  ONE  OF  THE  TWO  WORDS, 
ORDER  OR  BEARER,  (3)  THAT  THE  AMOUNT  BE  SPECIFIED 
AND  CERTAIN,  (4)  THAT  IT  BE  PAYABLE  IN  MONEY  ONLY, 
AND  (5)  THAT  IT  BE  AN  UNCONDITIONAL  PROMISE.  We 

shall  consider  these  in  order.  Bub  many  business  agree- 
ments are  in  fact  drawn  in  the  form  of  notes,  though  vio- 
lating one  or  more  of  these  rules.  They  are  not  on  that 
account  void;  they  may  be  perfectly  valid  and  binding  be- 
tween the  original  parties ;  the  only  effect  is  that  they  are 
not  negotiable.  Negotiable  notes  need  not  be  drawn  in 
precisely  the  forms  given.  All  are  negotiable  which  have 
in  substance  the  five  requisites  named.* 

17.  Date  of  Payment. — It  is  very  common   to  make  a 
note  payable  a  certain  number  of  days  or  months  after 
date.     That  renders  the  date  of  payment  certain,  but  in 
such  case  the  note  should  be  dated,  as  is  usually  done.     So 
the  date  is  certain  where  payment  is  made  dependent  on  an 
event  sure  to  occur,  as  where  A  promises  to  pay  B  on  the 
death  of  some  person.     But  if  the  time  depends  on  some 
event  which  may  never   occur,  as  for  instance  where  A 
promises  to  pay  B  when  the  latter  reaches  twenty-one,  the 
note  is  not  negotiable.     In  a  demand  note  the  date  of  pay- 
ment is  certain,  for  "  on  demand  "  means  "  to-day." 

18.  Negotiable  Words. — The  words  "order"  and  "  bear- 

*  This  is  the  general  rule,  though  a  few  States  require  something 
further.  Thus  in  Pennsylvania  the  words  "  without  defalcation"  or 
"  without  set-off  "  are  necessary  ;  in  Missouri  the  words  "  value  re- 
ceived; "  in  three  or  four  States  it  must  bo  payable  at  a  bank. 


Commercial  Paper.  113 

er"  are  called  negotiable  words,  because  the  use  of  one  of 
them  is  necessary  to  confer  negotiability.*  Thus  the  note 
in  form  6  may  be  valid,  but  it  is  not  negotiable.  Fay  may 
enforce  it  if  it  represents  a  legal,  real,  and  honest  debt, 
but  if  it  does  not  it  is  void  either  in  his  hands  or  in  the 
hands  of  any  one  else. 

19.  Amount. — It  may  be  for  any  amount,  but  the  amount 
must  be  specified  and  certain,  so  that  any  one   can  tell 
just  what  is  due.     Thus  a  promise  to  pay  "  $100,  and 
whatever  else  I  owe  for  repairs  to  my  house,"  is  not  nego- 
tiable, even  though  nothing  but  the  $100  was  really  owed, 
for  a  stranger  cannot  tell  what  is  due.    The  promise  to  pay 
interest  does  not  make  a  note  uncertain,  for  any  one  can 
calculate  its  amount. 

20.  Money. — It  must  be  a  promise  to  pay  in  money.     If 
payable  in  goods,  or  any  commodity,  or  even  in  the  money 
of  another  country,  it  is  not  negotiable.! 

21.  Unconditionally. — Unless  the  promise  on  the  note  is 
absolute,  and  without  condition,  it  is  not  negotiable.    Thus 
notes  having  such  terms  as  these,  "I  promise  to  pay  $100 
if  I  am  able,"  or  "  to  be  paid  out  of  the  money  arising 
from  .  .  .  sales,"  etc.,  are  not  negotiable.     And  it  makes 
no  difference  what  good  reason  there  is  to  believe  that  the 
conditions  will  be  fulfilled,  for  if  it  is  possible  that  one 
should  not  be  fulfilled,  that  will  produce  uncertainty. 

Thus  it  is  seen  that  certainty  is  the  purpose  of  nearly  all 
these  five  requisites  as  to  form.  Paper  which  is  uncertain 
in  its  terms  is  not  suited  to  the  purposes  of  negotiable  paper. 
Since  it  is  to  pass  from  one  to  another  like  other  property, 

*  Any  other  words  indicating  that  the  paper  was  intended  to  be 
negotiable  would  serve  the  purpose,  but  those  two  words  are  the 
only  ones  commonly  used. 

f  In  a  few  of  the  Western  States  a  promise  to  pay  in  personal 
property  is  negotiable. 


114  Particular  Cases. 

it  should  have  this  characteristic  of  other  property,  viz., 
that  one  can  tell  by  looking  at  it  just  what  it  is. 

22.  Manner  of  Transfer. — There  are  two  usual  modes  of 
transferring  commercial  paper,  (1)  by  delivery  of  the  pa- 
per alone,  (2)  by  the  owner's  writing  his  name  upon  the 
back  and  then  delivering  it.     The  latter  is  called  indorse 
ment.*     Thus  in  forms  1  or  5,  if  Fay  wishes  to  sell  the 
note  to  some  third  person,  he  writes  his  own  name  upon 
the  back  and  delivers  it.     PAPER  PAYABLE  TO  BEARER 

MAY  BE  TRANSFERRED  BY  DELIVERY  ALONE.  No  indorse- 
ment is  necessary,  though  it  may  be  made.  PAPER  PAY- 
ABLE TO  ORDER  MUST  BE  INDORSED  TO  BE  TRANSFERRED.! 

In  other  words,  in  paper  payable  to  bearer  there  is  no  con- 
dition of  negotiability  as  to  its  manner  of  transfer:  if  pay- 
able to  order,  the  condition  is  indorsement. 

23.  Indorsements  are  of  two  kinds,  in  full  and  in  blank. 
A  full  indorsement  consists  of  the  owner's  name  with  an 
order  to  pay  it  to  some  particular  person.     A  blank  in- 
dorsement is  the  name  without  such  order,  and  is  usually 
the  name  alone.     After  a  full  indorsement  the  paper  is 
still  payable  to  order ;  the  person  only  is  changed.     He 
must  then  indorse  it  if  he  wishes  to  transfer  it,  and  ho 
may  indorse  in  full  or  in  blank.     After  a  blank  indorse- 
ment the  paper  is  payable  to  bearer.     It  is  as  if  over  the 
name  were  written  "pay  the  within  to  the  bearer."     Thus 
an  order  note  may  become  a  bearer  note,  but  the  converse 
is  not  true  ;  a  note  which  is  or  has  become  payable  to  bearer 

*  In  another  sense  the  indorsement  is  the  words  written.  The 
word  is  sometimes  written  endorse. 

f  That  is,  and  keep  its  negotiable  character.  It  may  be  transferred 
without  indorsement,  like  any  other  debt  (p.  91,  sec.  13),  but  in  such 
case  it  is  transferred  as  a  debt  or  claim  only,  and  not  as  negotiable 
paper,  and  is  subject  to  all  the  conditions  or  defects  to  which  it  was 
subject  in  the  hands  of  the  person  so  transferring. 


Commercial  Paper.  115 

remains  so,  no  matter  what  the  subsequent  indorsements 
are.  But  one  may  write  over  a  prior  blank  indorsement 
an  order  to  pay  to  himself.  That  changes  it  again  to  an 
order  note  (forms  14,  15,  16). 

Note  to  Teacher. — Draw  up  notes  and  have  them  indorsed  by  one 
scholar  to  another,  in  the  two  ways. 

24.  Time  of  Transfer. — But  negotiable  paper  ceases  to 
have  its  peculiar  characteristics,  at  maturity,  i.e.,  the  last 
day  of  grace.     Thereafter  it  becomes  like  any  other  debt 
or  claim.     NEGOTIABLE  PAPER  LOSES  ITS  NEGOTIABILITY 
AT  MATURITY.*     This  does  not  mean  that  it  becomes  in- 
valid, but  siniply  that  one  who  receives  it  after  it  is  due 
gets  only  such  rights  as  the  one  from  whom  he  received  it 
had.     There  are  then  two  cases,    (1)  where   the   person 
transferring  it  after  it  is  due  has  the  right  to  enforce  it, 
(2)  where  he  has  not.     In  the  first  case  the  one  to  whom 
he  transfers  it  gets  the  right  to  enforce,  in  the  second  he 
does  not.f 

25.  Consideration. — ONE  WHO   RECEIVES    NEGOTIABLE 

PAPER,  GIVING  NO  MONEY  OR  PROPERTY  IN  EXCHANGE 
FOR  IT,  GETS  NO  BETTER  RIGHT  TO  ENFORCE  IT  THAN  THE 
ONE  FROM  WHOM  HE  RECEIVES  IT  HAD.  If  he  gives  no 

consideration  for  it,  he  loses  nothing  by  it.  The  thief  or 
finder  of  a  note,  though  payable  to  bearer,  cannot  enforce  it. 

*  This  is  so  as  to  all  notes  and  drafts  due  in  the  future.  As  to  de- 
maud  notes,  though  the  maker  may  be  sued  immediately,  yet  they 
remain  negotiable  for  a  short  time,  perhaps  two  or  three  months. 
As  to  checks,  sec  p.  129,  sec.  7. 

f  Thus  suppose  form  1  to  be  an  accommodation  note:  Fay  can- 
not ever  enforce  it,  as  we  have  seen,  but  he  can  sell  it  to  another 
person,  and  that  person  can  enforce  it;  and  therefore  any  one  receiv- 
ing it  from  the  latter,  whether  before  or  after  maturity,  can  also  en- 
force it;  but  if  Fay  keeps  it  until  February  7,  1882,  neither  he  nor 
any  one  to  whom  he  should  afterward  sell  it  could  enforce  it.  Again, 
suppose  the  note  was  stolen  from  Fay  (after  he  had  indorsed  it  in 
blank),  and  the  thief  should  sell  it  to  a  bank,  the  bank  could  enforce 
it  if  they  took  it  before  maturity,  but  not  otherwise. 


116  Particular  Cases. 

26.  Knowledge. —  ONE    WHO    EECEIVES    NEGOTIABLE 

PAPER,  KNOWING  AT  THE  TIME  OF  ANY  INVALIDATING 
DEFECT,  GETS  NO  BETTER  RIGHT  TO  ENFORCE  IT  THAN  THE 
ONE  FROM  WHOM  HE  RECEIVES  IT  HAD.  The  purchase 

must  not  only  be  before  maturity,  and  for  good  considera- 
tion, but  it  must  be  in  good  faith.  Thus  if  I  buy  a  note 
from  a  thief  knowing,  or  having  reason  to  know,  that  it  is 
stolen,  I  cannot  make  the  'maker  pay  me.  So  also,  if  I 
know  it  to  be  already  paid,  or  that  it  was  originally  given 
for  an  illegal  or  fraudulent  purpose.  If,  however,  I  do  not 
hear  of  the  defect  until  after  I  have  bought  it,  I  may  en- 
force it.  But  the  knowledge  that  it  was  an  accommodation 
note  is  of  no  effect,  and  that  kind  of  note  is  therefore  an 
exception  to  this  rule. 

27.  The  Practical  Rules  to  be  drawn  from  this  chapter 
are  as  follows: — (a)  If  we  are  taking  a  note  from  the  maker 
its  form  is  unimportant;  the  contract  must  have  the  seven 
requisites  and  that  is  all.     (b)  If  we  are  buying  one  from 
some  one  not  the  maker,  and  wish  to  be  sure  that  we  can 
force  the  maker  to  pay  it,  to  be  safe  we  must  make  sure 
of  one  of  two  things,  either  (1)  that  the  one  from  whom  we 
are  buying  has  himself  the  right  to  enforce  it,  or  (2)  that 
it  is  negotiable  paper  in  form,   and  is  transferred  to  us 
under  all   the  other  necessary  conditions  of  negotiability. 
The  absence  of  any  one  condition  gives  us  only  the  rights 
had  by  the  one  from  whom  we  receive  it. 

Note  to  Teacher. — The  circumstances  under  which  commercial 
paper  may  be  bought  and  sold  are,  of  course,  infinite  in  variety, 
and  only  a  few  examples  can  be  given  in  a  book  of  this  char- 
acter. But  it  must  be  left  to  the  individual  teacher — and  there 
is  ample  opportunity  for  it — to  test  the  scholar's  knowledge  and 
understanding  of  the  rules  in  the  foregoing  chapter,  by  stating 
cases  likely  to  occur  in  actual  life,  and  asking  for  their  effect  and 
why,  or  by  having  the  scholar  state  a  case  which  shall  illustrate 
on?  or  more  of  those  rules. 


Commercial  Paper.  117 

CHAPTER  XXIII. 

DRAFTS   AND    BILLS    OF    EXCHANGE. 

1.  Draft.  —  A  DRAFT  is  A  WRITTEN  ORDER,  SIGNED  BY 

ONE  PERSON,  ORDERING  ANOTHER  PERSON,  TO  WHOM  IT  IS 
DIRECTED,  TO  PAY  A  CERTAIN  SUM  OF  MONEY,  AT  A  CER- 
TAIN TIME,  TO  A  THIRD  PERSON  (NAMED),  OR  TO  HIS  ORDER, 

OR  TO  THE  BEARER.     The  following  is  a  common  form: 


The  person  ordering  [Jones]  is  called  the  drawer,  the 
one  to  whom  it  is  directed  [Barber]  is  called  the  person 
drawn  upon,  and  the  one  in  whose  favor  it  is  drawn,  i.e., 
to  whom  the  payment  is  directed  to  be  made  [Runyon  & 
Co.]  is  called  the  payee. 

2.  A  Bill  of  Exchange,  in  common  language,  is  a  draft, 
of  which  the  drawer  and  the  person  drawn  upon  live  in  dif- 
ferent countries,  and  which  is  therefore  drawn  in  one 
country  and  paid  in  the  other.  In  general,  the  rules 
governing  drafts  and  bills  of  exchange  are  the  same,  and 


118  Particular  Gases. 

we  shall  here  use  the  word  draft  as  meaning  either  of  them. 
In  legal  language,  in  fact,  they  are  both  known  as  bills  of 
exchange.  * 

3.  Use. — Drafts  came  into  use  before  notes,  have  been 
used  now  for  several  centuries,  and  have  been  of  much 
benefit  to  commerce  and  thus  to  civilization.     It  is  easily 
seen  that  if  certain  to  be  paid,  they  represent  like  notes 
so  much  money,  so  much  property,  which    may  be  safely 
and  easily  carried  or  sent  from  place  to  place.     Thus,  sup- 
pose Jones  in  New  York  owes  Runyon  &  Co.  of    Xew 
Orleans   $1000,    and   that   Barber  of  New   Orleans   owes 
Jones  $1000;  if,  now,  Jones  will  draw  and  send  to   Run- 
yon  &  Co.  his  draft  upon   Barber,  both  debts  can  be  thus 
paid,  while  otherwise  the  money  itself  would  have  to  be 
transported   from  New  Orleans   to   New  York   and  back 
again. 

4.  Kinds. — Like  notes,  drafts  are  made  payable  to  order 
or  to  bearer  (p.  106).     So  also  they  differ  as  to  the  time 
at  which  payment  is  to  be  made,  being  made  payable  "at 
sight,"  or  "on  demand,"  or  ".  .  .  .  days  after  sight,"  or 
"....   days  after  date,"   etc.,  according  as  the   parties 
choose.     Of  course  sufficient  time  should  be  allowed  so 
that  the  draft  may  be  presented  to  the  person  drawn  upon 
before  or  when  it  becomes  due.     "  At  sight"  and  "  on  de- 
mand "  mean  when  presented,  i.e.,  when  the  person  drawn 
upon  sees  the  draft.     (See  p. 278  for  some  forms.) 

5.  Character. — A  note  is  a  promise:  a  draft  is  an  order. 
In  the  transaction  in  which  a  note  is  given,  and  also  on  the 
face  of  the  note  itself,  there  are  originally  but  two  parties, 
the  maker  and  the  payee.     The  contract  is  complete  when 

*  Foreign  bills  are  often  drawn  in  triplicate;  three  alike,  except 
that  they  are  numbered  first,  second  and  third.  If  the  first  is  lost 
while  being  sent  for  payment  the  second  may  be  used.  Only  one  is 
paid  in  any  event  (form  9). 


Commercial  Paper.  119 

it  is  delivered  to  the  payee.  In  the  giving  of  a  draft  there 
are  two  persons  concerned  originally,  the  drawer  and  the 
payee,  and  the  draft  is,  as  we  shall  see,  an  implied  con- 
tract between  them  (sec.  9),  but  on  the  face  of  the  draft 
three  persons  are  named.  But  the  person  drawn  upon 
knows  nothing  about  it:  he  therefore  does  not  come  into 
the  contract,  until  it  is  presented  to  him  by  the  one  to 
whom  it  is  to  be  paid  (sec.  10,  11). 

6.  Acceptance  — The  draft,  being  drawn,  is  then  given  or     / , 
sent  by  the  drawer  to  the  person  to  whom  he  wishes  the 
money  paid.     This  one,  the  payee  or  bearer,  presents  it  to 

the  one  upon  whom  it  is  drawn.  It  need  not  be  presented 
until  it  is  due,  though  it  is  usually  done  immediately.  If 
when  presented  to.  him  he  agrees  to  pay  it  when  it  becomes 
due,  he  is  said  to  accept  it,  and  indicates  this  usually  by 
writing  across  its  face  the  word  "accepted"  with  his  own 
name  (form  10).  It  is  often  done  by  simply  writing  the 
name  across  the  face.  In  some  States  it  may  be  accepted 
orally.  After  he  has  accepted,  the  person  drawn  upon  is 
called  the  acceptor,  and  the  draft  itself  often  called  an  ac- 
ceptance. 

7.  When  Due. — A  DEAFT  PAYABLE  AT  A  FUTURE  TIME  is 

NOT  DUE  UNTIL  THE   THIRD  DAY  AFTER  ITS  SPECIFIED  DAY 

OF  PAYMENT.  Drafts  have  three  days  of  grace.  Thus,  if 
made  payable  thirty  days  from  its  date,  it  is  not  really  due 
until  the  thirty-third.  If  payable  at  sight,  or  so  many  days 
after  sight,  it  must  be  presented  and  accepted  in  order  to 
fix  the  day  of  payment.  Thus,  if  a  draft  drawn  payable 
ten  days  after  sight  is  presented  and  accepted  July  25th, 
it  becomes  due  August  7th.  If  payable  "on  demand"  it 
has  no  days  of  grace,  but  is  due  as  soon  as  it  is  accepted.* 

*  There  is  some  difference  in  the  States  as  to  days  of  grace  on 
drafts.  Thus  in  a  number,  drafts  payable  at  sight  (called  sight 
drafts),  have  no  days  of  gnice. 


120  Particular  Cases, 


8.  Transfer. — But  the  person  who  receives  the  draft  from 
the  drawer  may  not  wish  to  retain  it  until  it  becomes  due. 
He  may  prefer  the  money,  and  will  sell  it  to  another.     The 
transfer  is  made  in  the  same  way  as  in  the  case  of  a  note 
(p.  114):  if  payable  to  order  it  is  indorsed;  if  payable  to 
bearer  originally,  or  made  so  by  being  indorsed  in  blank,  it 
is  often  simply  delivered  without  indorsement.     A  draft 
may  be  transferred  in  these  ways  either  before  or  after  ac- 
ceptance, and  any  one  of  the  intermediate  owners  may  pre- 
sent it  for  acceptance.     When  it  becomes  due  the  owner  of 
it  at  that  time  presents  it  to  the  acceptor  for  payment.* 

9.  Drawer's  Agreement. — A  draft  is  a  contract  between 
the  drawer  and  the  person  to  whom  it  is  given.      THE 
DRAWER'S  AGREEMENT  is  TO  PAY  THE  DRAFT  IF  THE  PER- 
SON UPON  WHOM  IT  is  DRAWN  DOES  NOT.     It  is  as  if  he 
added  to  its  words  the  following:   "And  I  agree  to  pay  the 
amount  if  the  person  drawn  upon  refuses  to  accept  or  re- 
fuses to  pay."     He  is  in  the  position  of  a  surety  (Chap. 
XVI.)  or  a  first  indorser  (p.  132).     If  the  draft  is  payable 
at  sight,  or  a  certain  time  after  sight,  it  should  be  pre- 
sented to  the  person  drawn  upon  as  soon  as  it  can  be  con- 
veniently, or  the  drawer  will  be  discharged. 

10.  Acceptor's  Agreement  before  Acceptance. — The  per- 
son drawn  upon  does  not  perhaps  know  of  the  draft  until 
he  sees  it.     Therefore  until  he  accepts  it  he  makes  no 
agreement  with  the  owner  of  it,  either  to  pay  or  to  accept. 
Therefore  THE  PERSON  DRAWN  UPON  is  UNDER  NO  OBLI- 
GATION TO  THE   HOLDER  OF  A  DRAFT   UNLESS   HE  ACCEPTS 

*  Thus,  in  the  form  in  sec.  1,  Rnnyon  &  Co.,  on  receiving  it  from 
Jones,  may  transfer  it  to  S.  B.  Mapes  by  writing  on  the  back  "Pay 
to  S.  B.  Mapes  or  order"  and  signing  the  indorsement  "A.  B.  Run- 
yon  &  Co."  Mapes  perhaps  will  present  it  to  Barber  and  have  it 
accepted,  and  then  transfer  it  to  James  Brown.  Brown  perhaps  will 
retain  it  until  it  is  due,  and  then  Barber  will  pay  it  to  him  (form  16). 


Commercial  Paper. 


IT.  There  may  be,  however,  a  prior  agreement  between  the 
drawer  and  the  person  drawn  upon  giving  the  former  the 
right  to  draw,  and  to  refuse  to  accept  would  be  to  break 
that  contract.  The  drawer  therefore  might  have  the  right 
to  sue  him  if  he  refused  to  accept,  but  the  owner  of  the 
draft  would  not.* 

11.  After  Acceptance  THE  PERSON  DRAWN  UPON,  I.E., 

THE   ACCEPTOR,  IS   THE    PRINCIPAL    DEBTOR   AND    RESPON- 

SIBLE TO  ALL  PARTIES.  Acceptance  changes  the  nature  of 
the  instrument.  It  then  becomes  also  a  contract  between 
the  acceptor  and  the  person  then  owning  it,  or  any  one  who 
has  owned  it  or  who  may  own  it.  It  is  as  if  he  wrote  above 
his  name,  "I  promise  to  pay  this  when  due."  And  this 
contract  is  for  the  benefit  of  all  the  other  parties  whose 
names  appear  on  it.  He  becomes  primarily  responsible; 
they  only  if  he  fails  to  pay. 

12.  Principal  Debtor.  —  We  have  seen  that  a  note  and  a 
draft  represent  in  effect  a  debt,  an  amount  of  money  owed 
by  some  one,  and  that  the  transfer  of  the  paper  from  one 
owner  to  another  is  really  the  transfer  of  that  debt.     The 
person  owing  that  debt  we  call  the  principal  debtor.     In  a 
note  the  principal  debtor  is  the  maker,  and  his  contract 
is  to  pay,  unconditionally:  in  an  unaccepted  draft  the  prin- 
cipal debtor  is  the  drawer,  and  his  contract  is  conditional. 
i.e.,  to  pay  if  the  person  drawn  upon  does  not:  in  an  ac- 
cepted draft  the  principal  debtor  is  the  acceptor,  and  his 
contract  is  to  pay,  unconditionally.     If  the  principal  debtor 
fails  to  pay  it  when  he  should  it  is  said  to  be  dishonored. 

13.  Negotiability.  —  DRAFTS  ARE  NEGOTIABLE  BOTH  BE- 

*  Thus  if  A  agrees  to  allow  B  to  draw  on  him  for  $500,  and  B  does 
so  in  favor  of  C,  but  A  refuses  to  accept  the  draft,  the  contract  be- 
tween A  and  B  is  broken,  but  there  never  was  any  contract  between 
A  and  C.  C's  remedy  is  to  compel  B  to  carry  out  his  implied  agree- 
ment as  drawer  (sec.  9). 


Particular  Cases. 


FORE  AND  AFTER  ACCEPTANCE.  Negotiability  has  been 
already  explained  (pp.  107,  etc.),  and  we  have  seen  that  it 
only  relates  to  a  contract  which  has  been  transferred  by 
the  first  owner  to  some  one  else,  and  to  the  right  of  one  to 
enforce  it  when  the  one  from  whom  he  received  it  did  not 
have  that  right;  that  if  the  first  owner  keeps  it  until  it  is 
due,  it  is  only  enforceable  when  it  represents  a  legal,  real, 
and  honest  transaction,  and  that  if  it  is  enforceable  by  one 
party  it  is  also  enforceable  by  one  to  whom  it  is  transferred 
by  him,  whether  negotiable  or  not.  But  we  need  not  go 
over  these  principles  again:  ALL  THE  PRINCIPLES  OF  NEGO- 
TIABILITY APPLY  TO  DRAFTS,  AS  TO  NOTES. 

14.  Conditions  of  Negotiability.  —  Likewise,  to  have  tta 
quality  of  negotiability,  all  the  conditions  must  exist:  viz., 
the  five  requisites  as  to  the  form  of  the  draft,  those  as  to 
the  manner,  time,  and  consideration  for  its  transfer,  and  a<s 
to  the  knowledge  of  the  person  receiving  it  (pp.  111-116). 

Note  to  Teaclier.  —  Those  conditions  should  be  carefully  reviewed 
here,  and  applied  practically  to  drafts.  Sec.  15  and  16  contaii; 
some  illustrations.  In  every  illustration  it  would  be  well  to  so 
state  it  as  to  bring  out  its  justice,  together  with  the  injustice  of 
any  other  rule.  A  "  why"  greatly  assists  memory. 

In  other  words,  if  any  person  receives  a  draft  and  any 
single  condition  of  negotiability  is  absent,  he  merely  gets 
sucli  a  right  to  enforce  it  as  the  one  from  whom  he  received 
it  had.  If  that  Avas  a  full  right,  his  is  full;  if  that  was 
qualified,  his  is  qualified;  if  that  was  no  right,  his  is  no 
right,  and  he  gets  nothing.* 

*  For  instance,  suppose  C  is  the  payee  of  a  draft,  and  that  he  transfers 
\J  it  to  D.  If  it  be  payable  to  C's  order  and  he  transfers  it  without  in- 
dorsing it,  D  gets  no  better  right  to  enforce  it  than  C  had,  although 
D  may  have  paid  C  a  full  price  for  it,  and  honestly  believed  it  to  be 
valid  in  all  respects.  Again  suppose  C  did  not  sell  it  until  after  it 
became  due:  then  D  would  get  no  better  right  than  C's.  although  he 
paid  for  it,  and  it  was  regularly  indorsed. 


Commercial  Paper.  123 

But  on  the  other  hand,  if  all  the  conditions  do  exist,  i.e., 
if  (1)  the  draft  is  negotiable  in  form,  and  (2)  when  payable 
to  order  it  is  indorsed,  and  (3)  the  person  receiving  it  re- 
ceives it  before  it  is  due,  and  (4)  pays  money  or  other  con- 
sideration for  it,  and  (5)  has  no  reason  to  believe  it  is  not 
valid  in  all  respects,  then  the  person  who  so  receives  it  has 
the  right  to  enforce  it,  whether  the  one  from  whom  he  re- 
ceived it  had  that  right  or  not.  This  is  illustrated  in  the 
two  following  sections. 

15.  Accommodation  Drafts  are  of  two  kinds,  (1)  where 
the  drawer  is  accommodated  by  the  acceptor,  and  (2)  where 
the  payee  is  accommodated  by  the  drawer.  Thus,  in  the 
first  case,  if  A  draws  a  draft  on  B,  payable  to  C,  when  B 
owes  A  nothing,  but  B  (willing  to  accommodate  A)  accepts 
the  draft,  there  is  no  consideration  for  the  promise  to  pay, 
which  we  have  seen  (sec.  11),  B  makes  by  accepting. 
Nevertheless  C  can  enforce  it,  provided  he  received  it  be- 
fore maturity  and  gave  consideration  to  A  for  it.  So  also, 
any  one  receiving  it  from  C  can  enforce  it,  because  they  re- 
ceive the  same  rights  he  had.  But  suppose  the  acceptor  B 
does  not  pay  it  when  it  becomes  due,  and  the  owner  then 
compels  the  drawer  A  to  pay  it;  A  could  not  then  sue  B, 
for  the  reason  that  between  them  there  was  no  considera- 
tion for  the  acceptance. 

Taking  the  second  case,  suppose  C  pays  nothing  to  A  for 
it,  but  A  draws  it  to  accommodate  him  (i.e.,  in  effect  lends 
him  the  money).  There  is  then  no  consideration  for  the 
promise  which,  we  have  seen  (sec.  9),  A  makes  in  drawing 
the  draft;  therefore  C  could  never  force  A  to  fulfill  that 
promise.*  But  suppose  that  C  transfers  it  to  D  before  it 
is  due  and  D  pays  money  for  it;  D  could  then  enforce  A's 

*  We  are  now  considering  the  drawer's  agreement  only.  If  B 
should  accept  the  draft,  he  would  be  responsible  on  it  to  C  and  to  all 
others  to  the  same  extent  as  in  any  other  draft. 


124  Particular  Cases. 

implied  promise.  So  also  could  any  one  else  to  whom  D 
transferred  it,  for  the  reason  that  he  would  take  D's  rights. 
We  see,  therefore,  that  the  rule  of  contracts  which  accom- 
modation paper  is  excepted  from  under  some  circumstances 
is  that  one  requiring  consideration.  It  is  also  excepted 
from  one  of  the  conditions  of  negotiability,  viz.,  the  last 
one,  as  to  the  person's  knowledge.  It  makes  no  difference 
as  to  his  rights  that  the  person  who  receives  it  knows  it  to 
be  accommodation  paper. 

16.  Other  Examples. — Though   the   draft  should  have 
been  originally  given  for  an  illegal  purpose  (e.g.,  to  pay  a 
usurious  debt),  or  though   the  drawer  or  acceptor  is  de- 
frauded into  signing  the  draft,  yet  the  draft  can  be  enforced 
by  one  who  received  it,  believing  it  to  be  valid,  and  under 
all  the  other  conditions.     Its  being  paid  before  maturity, 
or  its  having  been  stolen,  does  not  affect  the  right  of  one 
who  receives  it  under  all  the  conditions.     In  the  case  of 
the  theft,  the  one  from  whom  it  was  stolen  must  lose  his 

)  /  money. '  Thus  we  see  that  the  important  question  to  ask 
when  we  are  buying  negotiable  paper  is,  Under  what  cir- 
cumstances do  we  receive  it?  But  in  all  other  contracts, 
the  question  to  ask  is,  Under  what  circumstances  did  the 
person  making  the  contract  make  it? 

17.  Difference  in  Laws. — The  rules  which  we  have  given 
in  this  and  the  preceding  chapter  are  the  prevailing  ones  in 
this  country  and  in  England,  but  in  some  of  the  particulars 
different  States  have  different  rules.     It  would  be  impossi- 
ble to  state   here   those   differences,   but  this  should  be 
always  borne  in  mind,  that  A  CONTRACT  is  GOVERNED  BY 

THE  LAW  OF  THE  STATE  IN  WHICH  IT  IS  MADE.       Therefore 

the  maker's  responsibility,  in  a  note,  is  governed  by  the 
law  of  the  State  where  it  is  drawn;  an  indorsees,  in  a  note 
or  draft,  by  the  law  of  the  State  where  he  indorses;  and 
an  acceptor's  by  the  law  of  the  State  where  he  accepts. 


Commercial  Paper.  125 

If  made  payable  in  a  particular  State,  the  law  of  that  State 
governs  it. 

Note  to  Teacher. — Different  ways  to  test  the  scholar's  understand- 
ing will  easily  suggest  themselves,  upon  this  subject  as  under 
notes,  as  for  instance  by  varying  the  names  of  the  parties,  their 
residences,  the  dates,  the  forms  of  the  drafts,  and  asking  for  the 
effects,  etc.,  etc.,  or  lie  might  be  required  to  draw  up  drafts 
which  should  have  certain  stated  characteristics,  etc.,  etc. 


126  Particular  Cases. 

CHAPTER  XXIV. 

CHECKS. 

1.  Definition. — A  CHECK  is  A  DRAFT  DRAWN  UPON  A 

BANK    OR    BANKER,    AND    MADE    PAYABLE    IMMEDIATELY. 

The  following  is  a  common  form: 


The  parties  are  designated  as  in  a  draft.  Thus  Jones  is 
the  drawer,  the  Ninth  National  Bank  is  the  person  drawn 
upon,  and  Fay  is  the  payee. 

2.  Use. — The  purpose  of  checks  is  to  save  the  handling 
of  money.  Like  drafts  and  notes,  they  represent  so  much 
money  or  property,  and  they  pass  from  one  to  another  like 
money.  In  the  city  of  New  York  alone,  in  a  single  day, 
many  millions  of  dollars  change  hands  by  means  of  checks. 
The  operation  is  as  follows:  Jones,  having  a  certain  amount 
of  money  which  he  does  not  wish  to  use  immediately,deposits 
it  in  a  bank,  i.e.,  lends  or  gives  it  to  the  bank  with  the 
agreement  that  the  bank  will  pay  any  portion  of  it  to  any 


Commercial  Paper.  127 

one  to  whom  lie  may  order  it  to  be  paid.  Jones  then  orders  it 
paid  in  such  amounts,  at  such  times,  and  to  such  persons 
as  he  chooses,  by  means  of  checks.  If  he  gives  Fay  a  check 
for  $245,  Fay  may  go  to  the  Ninth  National  Bank  and  get 
the  money,  or  if  Fay  has  an  account  with  some  bank  he 
may  deposit  the  check  with  that  bank  as  money,  and  that 
bank  will  collect  it  from  the  Ninth  National  Bank. 

3.  Like  other  Drafts. — A  check  is  like  other  drafts  in  most 
respects.     It  is  an  order,  which  the  bank  is  under  obligation 
to  the  drawer  to  obey,  so  long  as  there  remains  any  of  the 
drawer's  money  on  deposit  in  the  bank.     There  is  also  an 
implied  contract  between  the  drawer  and  the  payee  (p.  120). 
But  the  bank  knows  nothing  of  it  until  it  is  presented; 

THEBEFOKE  A  BANK  IS  UNDER  NO  OBLIGATION  TO  THE 
HOLDER  OF  AN  UNCERTIFIED  CHECK.  If  it  refuses  to  pay, 

the  holder  cannot  sue  the  bank,  but  only  the  drawer  and 
indorsers.  The  drawer  may  stop  payment,  i.e.,  order  the 
bank  not  to  pay  it,  and  this  is  often  done  when  checks  are 
stolen.  * 

4.  Difference  in  Form. — But  there  are  differences  between 
checks  and  other  drafts.      These  differences   are  of  two 
kinds,  (1)  in  form,  and  (2)  in  effect.     There  are  two  differ- 
ences in  form:  (1)  a  check  is  always  drawn  upon  a  bank, 
or  some  person  or  persons  currying  on  a  banking  business; 
(2)  it  is  always  made  payable  immediately,  usually  by  a  simple 
order  without  any  such  words  as  "on  demand,"  or  "on 
presentation,"  etc.     Unless  it  has  these  two  elements  it  is 
not  a  check,  but  an  ordinary  draft.     Thus,  if  it  reads, 

*  Stopping  of  checks  affects  only  the  bank's  right  to  pay.  It  is  a 
countermand  of  the  order.  It  does  not  affect  the  drawer's  implied 
contract.  Thus  if  payment  is  stopped,  the  payee  or  the  holder  has 
the  same  right  he  had  before. 

Note  to  Teacher. — Apply  this  principle  to  the  case  of  stolen  or  lost 
checks 


128  Particular  Cases. 

"  pay  to-morrow,"  or  "pay  one  day  from  date,"  it  is  not  a 
check.* 

5.  In  Effect,  the  important  difference  is  that   CHECKS 
HAVE  NO  DAYS  OF  GRACE.     They  are  due  when  presented. 
They  may  be  presented  to  the  bank  and  paid  as  soon  as 
drawn.     Other  drafts,  we  have  seen,  are  usually  presented 
for  acceptance  before  they  become  due,  but  checks  usually 
are  not.     They  may  be,  however  (sec.  6).  f 

6.  Certification.  —  A  forged  check  will  of  course  not  be 
paid,  nor  will  one  where  the  drawer  has  already  withdrawn 
all  the  money  he  deposited.     To  protect  one  against  these 
risks  when  a  check  is  offered  him  by  some  one  whom  he  does 
not  know  about,  the  practice  of  presenting  checks  for  cer- 
tification has  arisen.     This  consists  of  having  it  presented 
to  the  bank  before  or  soon  after  receiving  it,  where  the  word 

."certified,"  or  "good,"  is  written  across  the  face  of  the 
check  by  some  officer  of  the  bank  upon  which  it  is  drawn, 
with  his  signature,  or  often  the  signature  alone  (form  12). 
This  makes  the  bank  responsible.  CERTIFICATION  SUBSTI- 

TUTES THE  BANK  FOR  THE  DRAWER  AS  THE  PRINCIPAL 
DEBTOR.  It  is  an  assent  to  the  order,  and  a  promise  to  pay, 
which  they  must  fulfill  though  the  check  turns  out  to  be 
forged,  or  though  the  drawer  has  no  funds  there.  There- 
fore a  bank  will  not  certify  a  check  unless  the  check  is 
genuine,  and  the  drawer  has  funds  there. 

The  effect  of  certification  upon  the  drawer  is  probably 
different  in  different  cases.  If  after  receiving  it  the  owner 
presents  it  at  the  bank  and  it  is  certified  instead  of  being 
paid,  that  releases  the  drawer.  By  taking  the  certifica- 


*  Sometimes  checks  are  dated  ahead  (e.g.,  drawn  and  given  on 
January  4th  and  dated  January  7th).  Such  checks  are  still  valid 
checks,  but  they  have  no  force  until  the  date  arrives. 

f  See  p.  136,  sec.  13,  for  another  difference  between  checks  and 
drafts. 


Commercial  Paper.  129 

tion  instead  of  the  money  the  owner  accepts  the  bank  as 
his  debtor  instead  of  the  drawer.  But  the  law  is  not  fully 
settled  as  to  whether  the  drawer  is  released,  where  a  check 
is  used  which  was  certified  at  his  own  request  before  being 
delivered.  Probably  he  is  not.* 

7.  Negotiability. — CHECKS  ARE  NEGOTIABLE  UNDER  THE 
SAME  CONDITIONS  AS  NOTES  AND  DRAFTS.     Therefore  the 
practical  rules  to  be  observed  in  receiving  checks  are  the 
same  (p.  116,  sec.  27).     Thus,  they  should  be  payable  either 
to  order,  or  bearer;  if  payable  to  order  they  should  be  in- 
dorsed.   If,  then,  we  receive  one  before  it  has  been  presented 
to  the  bank,  giving  something  for  it,  and  have  no  reason  to 
believe  it  to  be  invalid  in  any  way,  we  may  compel  the 
drawer  to  pay  it,  or  if  it  has  been  certified,  we  may  compel 
the  bank  to  pay  it,  no  matter  in  what  sort  of  a  transaction 
it  originated.     Checks,  however,  do  not  remain  negotiable 
long.     They  must  be  presented  for  payment  as  soon  as  they 
can  be  conveniently. 

8.  Stamp. — A  national  law  requires  that  every  check  used 
shall  have  placed  upon  it  a  two-cent  revenue  stamp.     The 
absence  of  such  a  stamp  does  not  necessarily  render  it  in- 
valid, but  subjects  the  party  using  it  to  a  penalty  of  $50. 
It  should  be,  therefore,  affixed  to  the  check  before  it  is 
used,  and  cancelled  at  the  same  time. 

9.  A  Certificate  of  Deposit  is  a  certificate  issued  by  a  bank, 
showing   that  a  certain   person  has  deposited  a  certain 
amount  of  money  with  it.     The  implied  promise  is  to  repay 
it  when  demanded,  to  the  one  who  shall  be  the  owner  of 
the  certificate.     It  is,  in  effect,  a  certified  check,  and  is 
negotiable  in  the  same  way  (form  13). 

*  The  certification  of  a  check  is  like  the  acceptance  of  a  draft,  in   \J 
that  it  always  makes  the  bank  responsible:  it  is  unlike  acceptance,  in 
that  it  sometimes  releases  the  drawer,  which  acceptance  never  does. 


130  Particular  Cases. 


COMMERCIAL  NEGOTIABLE  PAPER. 

I.  NOTES. 

II.  DEAFTS,  or  BILLS  OF  EXCHANGE. 
III.  CHECKS. 


CONDITIONS  OF  NEGOTIABILITY. 

I.  As  to  FOEM  : 

1  Certainty  of  DATE  OF  PAYMENT; 

2.  Words  ORDER  or  BEARER;  . 

3.  Certainty  of  AMOUNT; 
4    Payable  in  MONEY; 

5.  Payable  UNCONDITIONALLY. 

II.  As  to  MANNEE  of  transfer: 

1.  If  payable  to  bearer,  either         \ 

(1)  originally,  or  >  no  condition. 

(2)  by  blank  indorsement.     ) 

2.  If  payable  to  order;  must  be  indorsed  by  one  to  whose 

order  payable. 

III.  As  to  TIME  of  transfer: 

Must  be  before  maturity. 

IV.  As  to  CONSIDEEATION  for  transfer: 

There  must  be  consideration. 

V.  As  to  KNOWLEDGE  of  defect: 

There  must  be  no  knowledge  (except  in  accommodation 
paper). 


Commercial  Paper. 


131 


TRANSFER  OF  A  CLAIM. 

SUPPOSE  THAT  A,  REPRESENTING  THAT  HE  HAS  A  CLAIM 
UPON    C    FOR   SOME   MONEY,  TRANSFERS  IT  TO  B: 

I.  If  A  COULD  have  enforced  it B  CAN: 

Whether  or  not  it  be  negotiable,  or  transferred  under  the 
conditions. 

II.  If  A  COULD  NOT  have  enforced  it, 

1.  It  had  no  consideration,  or  only  an  illegal  one,  or 

2.  It  had  been  paid,  or 
because    3.  C  had  also  a  claim  upon  A,  or 

4.  A  had  found  or  stolen  it  (being  commercial  paper),  or 

5.  Any  similar  reason ; 

'  I.  In  the  following  cases B  CANNOT  : 

{1.  An  ordinary  debt,  not  on  commercial  paper; 
2.  On  commercial,  but  non-negotiable  paper; 
3.  On  negotiable  paper,  but  with  some  condition  of 
negotiability  absent. 

II.  In  the  following  case B  CAN : 

1.  On  negotiable  paper,  and  transferred  under  all  the 
conditions  of  negotiability; 

01-  in  other  words, 

If  it  be  a  note,  draft,  or  check  signed  by  C,  and 
'  1.  Negotiable  in  its  form ; 

2.  If  payable  to  A,  then  indorsed  by  A,  either 

(  1.  by  blank  indorsement,  or 
|  2.  in  full  to  B. 

3.  Transferred  to  B  before  it  is  due, 

4.  B  giving  consideration  for  it, 

5.  B  having  no  knowledge  that  A  could  not  en- 

force it  (except  in  accommodation  paper). 


132  Particular  Cases. 

CHAPTER  XXV. 

INDORSEE'S  RESPONSIBILITY. 

1.  Two  Purposes  of  Indorsement. — When  a  person  puts 
his  name  on  the  back  of  a  note,  or  other  piece  of  commer- 
cial paper,  he  becomes  an  indorser.     An  indorsement  has 
two  distinct  purposes,  viz.,  (1)  as  a  means  of  transferring 
the  ownership,  and  (2)  as  creating  a  new  obligation  on  the 
part  of  the  person  transferring.     Thus,  taking  the  forms 
1  and  5  (see  form  14),  when  Fay  writes  "  Pay  to  S.  B. 
Mapes  or  order"  on  the  back,   and   delivers  the  note  to 
Mapes,  he  does  two  things:  (1)  he  transfers  the  contract  of 
Archibald  Brothers  to  Mapes,  and  (2)  he  makes  a  new  con- 
tract himself  with  Mapes.     INDORSEMENT  is  A  CONTRACT. 
We  have  already  considered  it  as  a  means  of  transfer  (p.  114). 
In  this  chapter  we  shall  consider  its  meaning  as  a  contract. 
The  rules  to  be  given  apply  to  indorsements  upon  all  kinds 
of  commercial  paper,  notes,  drafts,  checks,  certificates  of 
deposit,  etc. 

2.  A  Transfer  without  Indorsement  DOES  NOT  RENDER 

THE  PERSON  TRANSFERRING  RESPONSIBLE  FOR  THE  PAY- 
MENT. Thus,  if  a  check  is  made  payable  to  bearer,  it  may 
pass  from  one  to  another,  through  a  dozen  hands,  without 
making  any  one  of  the  successive  owners  responsible  for  its 
payment.  Each  one  takes  it  at  his  own  risk,  and  if  it  is 
not  paid,  the  final  owner  can  sue  only  the  drawer. 

3.  Order  of  Indorsers. — One  instrument  may  have  any 
number  of  indorsements.     The  parties  are  called  respec- 
tively the  first  indorser,  second  indorser,  etc.,  in  the  order 
in  which  they  receive  the  paper  and  indorse  it.*     Thus,  in 

*  This  generally  corresponds  to  the  order  in  which  the  names  ap- 
pear on  the  back,  but  it  need  not.    Brown  could  write  his  indorsement 


Commercial  Paper.  133 

form  14,  Fay  is  the  first  indorser,  Mapes  the  second,  and 
Brown  the  third.  The  payee  becomes  the  first  indorser, 
whether  on  a  note,  draft,  or  check.  Where  it  is  made  pay- 
able to  the  maker  himself,  the  maker,  payee,  and  first  in- 
dorser are  the  same  person  (form  15). 

4.  The    Contract.  —  AN    INDORSEMENT    BENDERS    THE 

PERSON  WHO   MAKES   IT    RESPONSIBLE    FOR  THE   PAYMENT. 

This  is  so  whether  it  is  a  full  or  a  blank  indorsement.  It  is 
a  guaranty  of  the  debt.  Thus,  when  I  write  my  name  on 
the  back  of  a  note  I  impliedly  say,  "  I  agree  to  pay  this 
note  if  the  maker  does  not  pay  it  when  due;"  if  it  be  a 
draft  which  has  not  yet  been  presented  for  acceptance,  it  is, 
"I  agree  to  pay  this  draft  if  the  person  drawn  upon  does 
not  accept  it,  or  if  he  accepts  it,  but  fails  to  pay;"  if  it  be 
a  draft  which  has  been  accepted,  it  is,  "I  agree  to  pay  this 
draft  if  the  acceptor  does  not  pay  it  when  due;"  if  it  be  a 
check,  it  is,  "I  agree  to  pay  this  check  if  the  bank  does 
not." 

5.  For  Whose  Benefit. — This  contract  is  made  not  only 
for  the  benefit  of  the  person  to  whom  I  am  transferring 
the  instrument,  but  also  for  that  of   any  one  who  may 
afterwards  own  it.     An  indorser  is  liable  to  any  one  who 
receives  it  after  him. 

6.  Therefore  the  person  who  owns  a  piece  of  commercial 
paper,  not  paid  when  it  is  due,  may  call  upon  any  one  of 
the  following  parties  to  pay  it:  in  a  note,  the  maker,  or 
any  one  whose  name  he  finds  indorsed  on  the  back;  in  an   \J 
unaccepted  draft  or  uncertified  check,  the  drawer,  or  any 
indorser;  in  an  accepted  draft,  the  acceptor,  drawer,  or  any 
indorser;  in  a  certified  check,  the  certifying  bank,  or  any 
indorser.*     If  any  indorser  is  compelled  to  pay  it,  he  may 

above  that  of  Fay.     The  order  of  indorsement  in  time  makes  the 
distinction  between  first,  second,  etc. 
*  And  sometimes  drawer  (see  p.  138). 


134 


Particular  Cases. 


make  any  prior  indorse r  pay  it  to  him,  until  the  principal 
debtor  is  reached;  who,  in  a  note,  is  the  maker;  in  an  un- 
accepted draft  or  uncertified  check,  the  drawer;  in  an  ac- 
cepted draft,  the  acceptor;  in  a  certified  check,  the  certify- 
ing bank.  Thus,  in  the  following  scheme,  each  one  of  the 
parties  is  responsible  to  each  one  below  him : 


In  a  note. 

In  an  unaccepted 
draft  or 
uncertified  check. 

In  an 
accepted  draft. 

In  a 
certified  check. 

1.  Maker. 
2.  1st  iudorser. 
3.  2d  indorser. 
4.  3d  indorser. 
Etc. 

1.  Drawer. 
2.  1st  indorser. 
3.  2d  indorser. 
4.  3d  indorser. 
Etc. 

1.  Acceptor. 
2.  Drawer. 
3.  1st  indorser. 
4.  3d  indorser. 
Etc. 

1.  The  bank. 
2.  1st  indorser. 
3.  2d  indorser. 
4.  3d  indorser. 
Etc. 

7.  Without  Recourse. — But  any  indorser  may  restrict  his 
responsibility.     If  the  instrument  is  payable  to  the  order 
of  some  one,  in  order  that  he  may  transfer  it  and  have  it 
retain  its  negotiability,  we  have  seen  that  he  must  indorse 
it.     But  he  may  wish  to  transfer  it  without  making  himself 
responsible  for  it.     This  he  can  do  by  adding  to  his  indorse- 
ment some  such  words  as  ''without  recourse"  (form  17). 
Such  an  indorsement,  therefore,  forms  an  exception  to  the 
rules  of  this  chapter.     It  is  not  a  contract. 

8.  Negotiability. — AN  INDORSEMENT  is  A  NEGOTIABLE 
CONTRACT.     When   this  contract  is  made,  the  parties  be- 
tween whom  it  is  made  are  the  indorser  himself  and  the 
one  to  whom  he  transfers  the  paper.     They  know  all  the 
transaction  connected  with  the  indorsement,  and  why  it  is 
made;    but   those  who   receive  it  afterwards   may  know 
nothing  about  it,  except  what  they  see  on  the  back  of  the 
paper,  i.e.,   the  indorsement  itself.     If,   then,  they  have 
taken  the  paper,  believing  the  indorsement  to  be  a  valid 
and  complete  contract,  the  indorser  should  not  be  allowed 


Qomwiercial  Paper.  135 

to  claim  that  it  was  not.  Consequently,  while  as  between 
the  indorser  and  the  one  next  to  him,  it  is  not  an  enforce- 
able contract  unless  it  has  the  seven  requisites  of  a  binding 
contract,  and  it  is  intended  between  them  that  the  indorser 
shall  be  responsible,  yet  as  between  the  indorser  and  some 
one  else,  i.e.,  some  party  later  than  the  one  next  to  him, 
the  contract  is  binding  if  that  party  takes  the  paper  relying 
on  the  indorsement.* 

9.  Demand  of  Payment. — When  a  note  or  draft  becomes 
due  its  payment  is  demanded.     But  NO  DEMAND  is  NECES- 
SARY TO   MAKE  THE   MAKER   OF  A  NOTE  OR  THE   ACCEPTOR 

OF  A  DRAFT  RESPONSIBLE.  Thus,  the  owner  may  have 
ascertained  beforehand  that  the  note  or  draft  would  not  be 
paid.  He  may  sue  them  as  soon  as  the  paper  is  due,  with- 
out demanding  its  payment. 

10.  But  as  to  Indorsers  the  rule  is  different.     To  MAKE 

THE  INDORSER  OF  A  NOTE,  OR  THE  INDORSER  OR  DRAWER 
OF  A  DRAFT  RESPONSIBLE,  THE  PAPER  MUST  BE  PRESENTED 
AND  PAYMENT  DEMANDED  OF  THE  MAKER  OR  ACCEPTOR  ON 

THE  VERY  DAY  WHEN  IT  BECOMES  DUE.  The  maker  of  a 
note,  and  the  acceptor  of  a  draft,  are  the  primary  debtors; 
the  others  are  sureties,  and  are  entitled  to  have  the  demand 

*  Suppose  a  check  made  by  A  to  the  order  of  B,  indorsed  by  B  to 
C,  by  C  to  D,  and  by  D  to  E  successively.  E  knows  what  the  agree- 
ment was  when  D  indorsed  and  transferred  the  check  to  him;  there- 
fore he  cannot  sue  D  unless  the  agreement  was  that  he  should  have 
that  right.  But  all  he  knows  about  the  contract  C  made  with  D,  or 
the  one  that  B  made  with  C,  is  the  indorsements  of  B  and  C  on  the 
back;  consequently  he  can  sue  them  any  way.  Now  suppose  he 
could  compel  D  to  pay  the  check,  then  the  question  would  arise, 
could  D  compel  C  or  B  to  reimburse  him?  This  would  be  settled  in 
the  same  way.  He  knows  the  whole  agreement  between  himself  and 
C,  but  he  may  not  know  anything  of  that  between  B  and  C.  The 
same  rules  of  negotiability  are  applicable  to  the  indorsees  contract 
as  to  the  maker's.  (See  pp.  108-117.) 


136  Particular  Cases. 

made  of  the  primary  debtors  first,  even  though  it  is  known 
that  they  will  refuse  to  pay.  If  the  paper  be  payable  at  a 
particular  place  the  demand  must  be  made  there.  So  also 
in  a  check,  the  drawer  or  indorser  cannot  be4  sued  unless  it 
is  first  presented,  and  its  payment  demanded  of  the  bank. 

11.  Notice. — But  demand  alone  is  not  sufficient.     IF  THE 

V  PAYMENT  IS  REFUSED,  NOTICE  OF  THAT  FACT  MUST  BE 
GIVEN  IMMEDIATELY  TO  THE  INDORSER  OR  DRAWER  OF 
COMMERCIAL  PAPER  TO  MAKE  HIM  RESPONSIBLE.  If  either 

the  demand  or  the  notice  is  omitted,  all  the  indorsers  and 
the  drawer  are  discharged.  The  reason  is  this:  that  the 
indorser  or  drawer,  compelled  to  take  up  the  paper  (i.e., 
pay  it),  may  have  the  earliest  opportunity  to  protect  him- 
self against  loss.  An  owner,  knowing  that  one  of  the  in- 
dorsers was  well  able  to  pay,  might  make  no  haste  to  sue 
the  maker,  but  the  indorser  being  notified,  may  pay  it,  and 
sue  the  maker  immediately.  After  the  notice  has  been 
given,  the  owner  may  delay  suing  as  long  as  he  wishes, 
without  losing  his  right.* 

12.  Notice  of  Non-Acceptance. — In  like  manner,  if  the 
person  drawn  iipon  in  a  draft  refuses  to  accept  it,  or  if  a 
bank  refuses  to  pay  an  uncertified  check,  notice  must  be 
immediately  given  to  the  drawer  and  indorsers,  or  they  will 
be  discharged. 

13.  Time  of  Demand. — It  has  been  already  stated  that  in 
notes  and  drafts  due  at  some  certain  time  in  the  future, 
the  demand  must  be  made  on  the  very  day  they  become 
due,  i.e.,  the  last  day  of  grace.     As  to  notes  and  drafts 
which  are  made  due  "  on  demand,"  to  render  the  maker  or 
acceptor  responsible  the  demand  need  never.be  made,  but 
to  make  an  indorser  responsible  it  would  be  unsafe  to  de- 
lay long,  say  more  than  a  month  or  two. 

As  to  checks,  demand  of  payment  should  be  made  as 

*  But  not  beyond  six  years  (Chap.  XVII.). 


Commercial  Paper.  137 

soon  as  possible.  The  drawer  is  not  discharged  by  any 
delay,  unless  he  can  show  that  he  was  injured  by  it,  as  by 
the  bank's  failing  in  the  mean  time;  but  the  indorser  is 
discharged,  unless  it  is  sent  to  the  bank  for  payment  before 
the  end  of  the  next  day  after  the  person  to  whom  he  in- 
dorsed it  receives  it. 

14.  Time    of    Notice. — THE    NOTICE    MUST    BE    SENT     s 

BEFORE  THE  END  OF  THE  NEXT  DAT  AFTEE  THE  REFUSAL 

TO  PAY  OR  ACCEPT  is  MADE.  This  applies  to  all  kinds  of 
commercial  paper.  Thus,  if  the  paper  is  due  on  March 
8th,  and  payment  is  demanded  at  10  A.M.,  the  notice  must 
be  sent  before  the  close  of  the  9th.  Even  though  the 
debtor  should  promise  to  pay  it  in  a  few  days,  and  the 
owner  of  the  paper  should  be  willing  to  trust  him  to  that 
extent,  yet  the  notice  should  be  sent,  for  a  failure  to  send 
it  in  time  discharges  a  drawer  or  indorser  in  any  event. 
These  rules  as  to  the  time  of  demand  and  notice  are  very 
strict,  and  particular  care  should  be  paid  to  them. 

Note  to  Teacher. — It  would  be  useful  to  take  each  one  of  the  forms 
of  notes,  drafts,  and  checks  on  pp.  275  to  280,  and  state  when 
demand  of  payment  may  or  should  be  made,  and  when  the 
notice  should  be  sent  in  each  case. 

15.  Manner  of  Notice. — The  notice  of  non-payment  or 
non-acceptance  is  usually  written.     It  must  describe  the 
paper  in  such  way  that  the  one  to  whom  it  is  given  or  sent    , 
shall  know  exactly  the  instrument  referred  to.     A  useful    !- 
way  is  to  state  the  amount,  date,  and  parties  (form  18). 

It  may  generally  be  sent  by  mail,  and  should  be  sent  to  the 
party's  usual  address,  his  residence,  or  place  of  business.* 
It  is  sufficient  that  the  notice  be  sent,  whether  it  be  re- 
ceived or  not. 

*  In  some  States  if  the  parties  reside  in  the  same  town  it  is  unsafe     ( 
to  \ise  the  mail,  the  notice  sent  in  that  way  being  good  only  if  it  is 
actually  received.     By  parties  is  meant  the  party  sending  the  notice 
and  the  one  to  whom  it  is  sent. 


188  Particular  Cases. 

16.  By  Whom. — Any  one  acting  for  the  owner  may  make 
the  demand  and  send  the  notice.     Banks  often  do  it  for 
those  who  keep  accounts  with  them.     Usually  the  owner 
or  his  agent  notifies  all  the  parties  on  the  paper,  and  this 
is  the  prudent  way.     It  renders  all  parties  responsible  to 
him,  and  each  responsible  to  each  other  in  their  order. 
But  he  need  notify  only  such  as  he  chooses  to  hold  respon- 
sible to  himself.     Consequently  if  any  indorser  is  notified, 
and  indorsers  or  others  prior  to  him  are  not,  he  must  him- 
self notify  them  if  he  wishes  to  hold  them  responsible  to 
him.     For  such  purpose  each  one  has  the  day  on  which  he 
received  the  notice  sent  to  him,  and  the  next  day,  in  which 
to  send  his  notice. 

17.  Protest. — This  demanding  of  payment  and  sending 
of  notice  are  together  often  called  protest,  though  legally 
that  word  has  a  different  meaning.     It  is  commonly  done 
by  an  officer  called  a  notary  public,  to  whom  the  owner 
delivers  the  paper  for  that   purpose.      The   notary  then 
usually  draws  up  a  certificate  showing  what  he  has  done, 
and  attaches  it  to  the  note  or  draft.     On  all  commercial 
paper,  except  foreign  bills  of  exchange,  any  one  may  make 
the  demand  and  serve  the  notice.     On  foreign  bills  a  notary 
should  be  used. 


Commercial  Paper.  139 


RESPONSIBILITY 

of  parties  to  commercial  paper  to  the  owner.* 

I.   Those  NOT  RESPONSIBLE  to  the  owner; 

f  1.  The  person  drawn  upon  in  a  draft,  until  he  has  accepted, 
I  2.  The  bank,  in  an  uncertified  check, 
•(  3.  The  drawer,  in  a  certified  check  (sometimes), 
4.  Any  prior  owner,  of  any  kind  of  paper,  who  has  not  in- 
dorsed it,  or  who  has  indorsed  without  recourse. 

II.  Those  RESPONSIBLE  WITHOUT  DEMAND  being  made  on 
the  principal  debtor  on  the  day  of  payment ; 
(  1.  Maker  of  note, 
(  2.  Acceptor  of  draft. 

III.    Those   RESPONSIBLE    ONLY  WHEN    DEMAND   HAS  BEEN 
MADE  on  the  principal  debtor,  and  notice  given 
them  within  the  proper  time; 
'  1.  Indorser  of  note, 

2.  Drawer  of  draft, 

3.  Indorser  of  draft, 

4.  Drawer  of  check, 

5.  Indorser  of  check. 

*  This  means  the  usual  responsibility.  Of  course  the  parties  may 
make  such  contract  as  they  choose,  to  be  responsible  or  not,  in  any 
cases. 


140  Particular  Cases. 


THINGS  NECESSARY 

to  be  done  by  the  owner  of  any  of  the  ordinary  kinds  of 
commercial  paper,  in  order  to  render  the  parties  upon  it 
responsible  to  him. 

IF  IT  BE, 

I.   A  NOTE  HAVING  NO  INDORSEES; 

Nothing;  the  maker  is  responsible  without  demand. 

II.  A  NOTE  HAVING  INDORSEES,  and  due  at  a  specified 
time; 
"1.  Present  it  to  the  maker  for  payment,  on  the  day  it  is 

due,  and 

2.  If  not  paid,  send  notice  of  its  non-payment,  to  each  in- 
dorser,  on  that  day  or  the  next. 

III.    A  DEAFT   NOT  YET   PEESENTED   FOE  ACCEPTANCE; 

I.    IF   DUE   AT   SIGHT,    OR   A   CERTAIN   TIME   AFTER   SIGHT, 

"1.  Present  it  to  the  person  drawn  upon,  for  accep- 
tance, as  soou  as  possible, 

2.  If  not  accepted,  send  notice  of  its  non-acceptance, 
to  the  drawer  and  each  indorser,  on  the  day 
acceptance  is  refused,  or  the  next  day. 

II.    IF   DUE   AT   A   SPECIFIED   TIME. 

(1.  Present  it  to  the  person  drawn  upon,  for  accep- 
tance, any  time  before  it  is  due,  and 
2.  If  not  accepted,  send  notice  of  its  non-acceptance, 
to  the  drawer  and  each  indorser,  on  the  day 
acceptance  is  refused,  or  the  next. 
(If  accepted,  see  IV.) 
or 

1.  Present  it  to  the  person  drawn  upon,  on  the  day 

it  is  due,  and 

2.  If  not  paid,  fend  notice  of  its  non-payment,  to  the 

drawer  and  each  indorser,  on  that  day  or  the 
next. 


Commercial  Paper. 


141 


IV.    AN  ACCEPTED  DRAFT  ; 

1.  Present  it  to  the  acceptor,  for  payment,  on  the  day  it  is 

due,  and 

2.  If  not  paid,  send  notice  of  its  non-payment,  to  the  drawer 

and  each  indorser,  on  that  day  or  the  next. 

V.    AN  UNCERTIFIED  CHECK  ; 

I.  To  make  DRAWER  responsible, 

1.  Present  it  to  the  bank,  for  payment,  any  time, 

and 

2.  If  not  paid,  send  notice  of  iis  non-payment,  to 

him,  on  the  day  payment  is  refused,  or  the 
next. 

II.  To  make  AN  INDORSER  responsible, 

'1.  Present  or  send  it  to  the  bank,  for  payment,  the 
day  it  is  received  from  the  indorser,  or  the 
next  day,  and 

2.  If  not  paid,  send  notice  of  its  non-payment,  to  the 
indorser  on  that  day  or  the  next. 

VI.    A  CERTIFIED   CHECK  ; 

f     I.  To  make  DRAWER  responsible  (when  not  discharged), 
f 1.  Present  it  to  the  bank,  for  payment,  any  time,  and 
2.  If  not  paid,  send  notice  of  its  non-payment,  to 
him,  on  the  day  payment  is  refused,  or  the 
next. 

II.  To  make  BANK  responsible, 

Present  it  to  the  bank,  for  payment,  any  time. 

III.  To  make  AN  INDORSER  responsible, 

1.  Present  or  send  it  to  the  bank,  for  payment,  the 

day  it  is  received  from  the  indorser,  or  the 
next  day,  and 

2.  If  not  paid,  send  notice  of  its  non-payment,  to  the 

indorser,  on  that  day  or  the  next. 


142  Particular  Cases. 

CHAPTER  XXVI. 

FORGED    PAPER. 

1.  Forgery  is  THE  FRAUDULENTLY  MAKING  OR  ALTERING 
OF  A  WRITTEN  INSTRUMENT. — Commercial  paper  is  fre- 
quently forged  by  the  forger's  making    a    check,    draft, 
etc.,  in  the  name  of  some  responsible  person,  since  it  is  so 
easy  to  obtain  the  money  if  the  forgery  succeeds.     An  in- 
dorsement is  itself  a  written  instrument,  and  therefore  if 
any  one  having  or  finding  a  piece  of  commercial  paper 
made  payable  to  the  order  of  some  one  else,  should  indorse 
it  in  his  name,  without  authority  to  do  so,  and  with  a 
fraudulent  intent,  it  would  be  forgery.     So  any  material 
alteration  made,  with  intent  to  defraud,  on  a  true  instru- 
ment, is  forgery.     Thus,  suppose  the  amount  in  a  check 
were  written  thus,  "$£0.00,"  a  forgery  might  be  commit- 
ted merely  by  erasing  the  dot. 

2.  General  Principle. — So  far,  in  this  book,  we  have  con- 
sidered only  true  instruments.     All  the  rules  of  contracts, 
notes,  etc.,  apply  only  to  such  as  are  really  signed  by  the 
one  by  whom  they  purport  to  be,  or  by  some  one  author- 
ized to  act  as  his  agent  for  that  purpose.     A  FORGED  IN- 
STRUMENT is  NOT  COMMERCIAL  PAPER.      Being  false,  it 
represents  neither  a  contract  nor  property,  and  no  rights 
are  gained  by  its  possession  or  transfer.     This  general  prin- 
ciple is  illustrated  in  the  following  sections. 

3.  One  whose  name   is  forged  CANNOT  BE   MADE   RE- 
SPONSIBLE.— The  act  is  not  his,  and  one  certainly  should 
not  be  held  responsible  for  another's  acts,  which  are  en- 
tirely unauthorized.     Thus,  if  a  note  is  forged  in  my  name 
as  maker,  or  a  draft  forged  in  my  name  as  drawer,  or  the 
acceptance  forged  in  my  name  as  acceptor,  or  my  indorse- 
ment forged  upon  any  paper,  I  do  not  make  the  contract 


Commercial  Paper,  143 

and  therefore  cannot  be  made  to  fulfill  it,  i.e.,  to  pay.  So, 
if  my  name  is  forged  as  the  drawer  of  a  check,  and  the 
bank  believing  it  genuine  pays  it,  the  bank  must  lose  rather 
than  I.  It  makes  no  difference  how  careful  or  honest  one 
is  who  takes  forged  paper.  He  must  always  take  the  risk 
of  its  being  a  forgery. 

4.  Payment  under  Mistake. — But  the  rule  goes  still  fur- 
ther.    One  whose  name  is  forged  not  only  need  not  pay, 
but  even  if  he  should  be  himself  deceived  by  the  skillful- 
ness  of  the  forgery,  and  should  pay,  nevertheless,  he  may 
recover  his  money  from  the  one  to  whom  he  paid  it.     This 

is  but  one  case  of  the  general  principle  that  MONEY  PAID     ,_ 

UNDER  A  MISTAKE  MUST  BE  REFUNDED.       Thus,  even  if  the 

supposed  maker,  or  drawer,  or  indorser  should,  after  a 
careful  examination,  admit  his  signature  to  be  genuine  and 
should  pay,  yet  the  one  to  whom  he  paid  would  have  to  re- 
fund if  the  signature  turned  out  to  be  forged. 

5.  Exceptions. — There  are  two  quite  important  exceptions 
to  the  rule  of  the  preceding  section.     They  both  relate  to 
the  case  where  a  person  drawn  upon  has  recognized  the 
paper  as  genuine  either  by  paying  it,  or  accepting,  or  (in  a 
check)  certifying  it,  for  a  bona  fide  owner.     The  cases  are   / 
(1)  where  the  drawer's  name  is  forged,  and  (2)  where  the  ' 
acceptance  (in  a  check  certification)  is  forged.     If  in  those 
two  cases  the  person,  or  bank,  drawn  upon,  accepts  or  cer- 
tifies or  pays,  they  must  stand  by  the  act.*     The  reason 
for  this  is  the  convenience  of  business. 


*  Thus,  in  the  check  on  page  126,  the  Ninth  National  Bank  should 
be  certain  that  the  signature  of  Jones  is  genuine  before  it  pays  or 
certifies,  for  it  cannot  recall  the  act.  If  it  should  certify  it  would 
have  to  pay  the  check,  and  when  paid  to  a  bona  fide  owner  it  could 
neither  recover  its  amount  back  from  him,  nor  charge  it  against 
Jones'  account.  The  bank  would  lose  the  amount. 

Note  to  Teacher. — Have  the  scholar  apply  this  rule  to  the  draft  on 
p.  117. 


144  Particular  Cases. 

6.  Transfer. — Since  forged  paper  is  in   reality  nothing 
but  a  piece  of  waste  paper,  one  who  sells  it  to  another  in 
reality  sells  nothing  except  so  far  as  it  is  genuine,  even 
though  both  believe  it  genuine  as  to  the  whole.*     There- 
fore one  who  buys  forged  paper  may  recover  what  he  loses 
by  it  from  the  one  from  whom  he  buys  it,  because  it  is 
money  paid  under  a  mistake.     Thus  if  there  are  a  series  of 
real  indorsers  upon  a  piece  of  commercial  paper  which 
afterwards  turns  out  to  be  forged,  they  are  each  responsible 
to  each  other  in  the  regular  order  (p.  132)  as  if  it  were  not 
forged,  and  the  one  who  took  it  from  the  forger  must  bear 
the  loss  unless  he  can  recover  its  amount  from  the  forger. 
Therefore  an  indorsement  may  be  said  to  guarantee  the 
genuineness  of  the  paper. 

7.  Raising  Amount. — Paper  is  sometimes  forged  by  eras- 
ing the  amount  named  in  a  genuine  instrument  and  putting 
in  a  larger  amount.     It  is  then  perfectly  valid  as  to  the 
original   sum,  but  wholly  void   as  to   the  excess.      Even 
though  it  is  accepted  or  certified  after  being  raised,  the 
acceptance  or  certification  does  not  make  the  acceptor  or  the 
bank  responsible  for  any  more  than  the  original  sum.    And 
if  the  excess  should  be  paid  it  could  be  recovered.     The 
practical  business  suggestion  to  be  gained  from  all  these 
rules  about  commercial  paper  is  that  in  buying  it,  unless 
we  are  absolutely  certain  that  it  is  genuine  and  a  valid  con- 
tract in  every  respect,  we  should  be  careful  about  those 
from  whom  we  buy  it,  so  as  to  have  some  one  responsible 
to  fall  back  upon  if  it  turns  out  invalid. 

Note  to  Teacher.— In  all  cases  of  dishonored  or  forged  commercial 
paper  there  is  some  one  who  must  sustain  the  loss  finally,  some 
one  who  is  himself  responsible,  but  who  has  no  one  else  to  look 
to  from  whom  he  can  make  a  collection,  because  the  one  re- 
sponsible to  him  has  failed,  or  has  escaped.  Have  the  scholar 
point  out  in  different  cases  who  must  bear  the  loss. 

*On  the  same  principle  a  payment  in  counterfeit  money  is  no  pay- 
ment. 


Commercial  Paper.  145 

CHAPTER  XXVH 

MONEY. 

1.  Definition. — Money  means  those  articles  which  are  re- 
ceived and  pass  from  hand  to  hand  among  all  the  people 
as  the  representative  of  so  much  value.     In  business  it  is 
often  called  cash.     All  civilized  nations  have  some  form  of 
money,  and  generally  it  consists  either  of  coin  made  by  the 
government,  or  paper  money  issued  or  recognized  as  money 
by  the  government.     Throughout  the  United  States  the 
money  is  now  substantially  uniform,  any  of  it  being  re- 
ceived as  money  in  every  State;  but  this  was  not  always  so. 

2.  Two  Kinds. —The  money  of  the  United  States  is  of 
two  kinds,  (1)  coin,  and  (2)  paper  money  (often  called  cur- 
rency}.    The  coin  is  chiefly  of  two  kinds,  gold  and  silver. 
The  paper  money  is  chiefly  of  two  kinds,  United  States 
Notes*  and  National  Bank  Bills.     There  are  besides  the 
small  copper  and  nickel  coins. 

3.  Character. — Coin  has  a  value  of  its  own,  an  intrinsic 
value  as  metal,  irrespective  of  its  being  stamped  as  coin. 
But  paper  money  has  practically  no  value,  except  for  what 
is  written  on  its  face.      Thus  the   United   States  Notes 
read  as  follows:  "The  United  States  will  pay  the  bearer 

ten  dollars."     A  bank  bill  reads  as  follows:  "The 

Bank,  of  the  City  of  New  York,  will  pay  ten  dollars  to 
bearer  on  demand. "     Each  is  signed  by  the  proper  officers. 
Paper  money,  therefore,  is  merely  a  promise,  a  negotiable  de- 
mand note.     In  one  case  the  National  Government  prom- 
ises, and  in  the  other  the  particular  bank.     It  only  passes 
current  at  the  same  value  as  the  coin,  because  all  believe 
they  can  obtain  payment  in  coin  whenever  they  wish. 

*  Popularly  called  greenbacks. — Gold  and  silver  are  the  safest  forms 
of  money.  Paper  money  is  convenient,  but  dangerous,  unless  its 
amount  is  carefully  limited. 


146  Particular  Cases. 

4.  Legal  Tender  is  THAT  KIND  OF  MONEY  WHICH  BY 

LAW    CAN    BE    OFFERED    IN    PAYMENT    OF    A    DEBT.       The 

creditor  may  if  he  chooses  take  in  payment  not  only  any 
kind  of  money,  but  also  any  other  article,  such  as  a  draft, 
or  goods.  Checks  are  very  commonly  used  for  that  pur- 
pose. But,  if  it  be  insisted  on,  the  person  bound  to  pay 
must  provide  legal  tender.  It  is  so  called  because  it  is 
what  may  be  legally  tendered  (i.e.,  offered)  in  payment. 

5.  What  is. — Not  all   money  is  legal  tender.      In  this 
country  now  THE  LEGAL  TENDER  CONSISTS  SUBSTANTIALLY 
OF  THE  UNITED  STATES  COIN  *  AND  THE  UNITED  STATES 
NOTES.     Thus  all  our  money  is  legal   tender  except  the 
bank  bills,  but  that  distinction  is  now  of  little  importance, 
for  the  reason  that  the  payment  of  the  National  Bank  Bills 
is  so  well  secured  that  they  are  as  readily  accepted  by  all 
people  as  any  other  money. 


MONEY 

OF  THE  UNITED  STATES. 

I.  COIN. 

1.  GOLD  COINS, 

2.  SILVER  COINS, 

3.  SMALL  COPPER  AND  NICKEL  COINS 

(1  to  5  cent  pieces), 

H.  PAPER  MONEY. 

4.  UNITED  STATES  NOTES, 

5.  NATIONAL  BANK  BILLS Not  Legal  Tender. 

*  Except  the  trade-dollar,  which  is  not  legal  tender.  The  silver 
coins  of  less  than  $1.00  are  legal  tender  up  to  the  amount  of  $10. 
The  copper  and  uickel  pieces  are  legal  tender  up  to  the  amount  of 
25  cents. 


Legal  Tender. 


Commercial  Paper.  147 


SUMMARY  OF  LEADING  RULES  OF  COMMERCIAL  PAPER. 

I.  NOTES. 

1.  A  NOTE   is  a  written  promise,  signed  by  the  person 
promising,  to  pay  a  certain  sum  of  money,  at  a  certain  time, 
to  a  person  named,  or  to  his  order,  or  to  the  bearer. 

2.  There  are  TWO  KINDS  of  notes,  those  payable  (1)  to 
order,  and  (2)  to  bearer. 

3.  A  note  payable  at  a  future  time  is  not  DUE  until  the 
third  day  after  its  specified  day  of  payment. 

4.  In  the  hands  of  the  ORIGINAL  HOLDER  of  a  note  it  is 
a  binding  contract  provided  it  has  all  the  requisites  of  a 
binding  contract,  but  not  otherwise. 

5.  NEGOTIABILITY  in  commercial  paper  is  the  quality  of  ,   / 
being  enforceable  by  one  receiving  it,  though  not  enforce-  ^ 
able  by  the  one  from  whom  it  is  received. 

6.  THE  CIRCUMSTANCES  which,  though  rendering  nego- 
tiable paper  void  in  the  hands  of  one  party,  yet  do  not  affect 
the  rights  of  others  receiving  it  through  him  are  in  general 
those  which  do  not  appear  on  the  instrument  itself. 

7.  The  FIVE  THINGS  necessary  in  the  FORM  of  commercial 
paper  to  make  it  negotiable  are,  (1)  that  the  date  of  pay- 
ment be  certain  to  come,  (2)  that  it  have  one  of  the  two 
words  order  or  bearer,  (3)  that  the  amount  be  specified  and 
certain,  (4)  that  it  be  payable  in  money  only,  and  (5)  that 
it  be  an  unconditional  promise. 

8.  Paper  payable  to  BEARER  may  be  transferred  by  de- 
livery alone. 

9.  Paper  payable  to  ORDER  must  be  indorsed  to  be  trans- 
ferred. 


148  Particular  Cases. 

10.  Negotiable  paper  loses  its  negotiability  at  MATURITY. 

11.  One   who    receives   commercial   paper    GIVING    NO 
MONET  or  property  in  exchange   for  it,   gets  no   better 
right  to  enforce  it  than  the  one  from  whom  he  receives  it 
had. 

12.  One  who  receives  commercial  paper  KNOWING  at  the 
time  of  any  invalidating  defect   gets   no  better  right  to 
enforce  it  than  the  one  from  whom  he  receives  it  had  (ex- 
cept accommodation  paper). 

II.  DRAFTS  AND  BILLS  OF  EXCHANGE. 

1.  A  DRAFT  is  a  written  order,  signed  by  one  person, 
ordering  another  person,  to  whom  it  is  directed,  to  pay  a 
certain  sum  of  money,  at  a  certain  time,  to  a  third  person 
(named),  or  to  his  order,  or  to.  the  bearer. 

2.  A  draft  payable  at  a  future  time  is  not  DUE  until  the 
third  day  after  its  specified  day  of  payment. 

3.  The  DRAWER'S  AGREEMENT  is  to  pay  the  draft  if  the 
person  upon  whom  it  is  drawn  does  not. 

4.  The  person  drawn  upon  is  under  no  obligation  to  the 
holder  of  a  draft  UNLESS  HE  ACCEPTS  it. 

5.  AFTER  ACCEPTANCE  the  person  drawn  upon,  i.e.,  the 
acceptor,  is  the  principal   debtor,  and    responsible  to  all 
parties. 

6.  Drafts  are  NEGOTIABLE    both    before   and   after  ac- 
ceptance. 

7.  ALL  THE  PRINCIPLES  of  negotiability  apply  to  drafts, 
as  to  notes. 

8.  A  contract  is  governed  by  the  LAW  OF  THE  STATE  in 
which  it  is  made. 


Commercial  Paper.  149 


III.  CHECKS. 

1.  A  CHECK  is  a  draft  drawn  upon  a  bank  or  banker,  and 
made  payable  immediately. 

2.  A  bank  is  under  NO  OBLIGATION"  to  the  holder  of  an 

UNCERTIFIED  check. 

3.  Checks  have  no  DAYS  OF  GRACE. 

4.  CERTIFICATION  substitutes  the  bank  for  the  drawer 
as  the  principal  debtor. 

5.  Checks  are  NEGOTIABLE  under  the  same  conditions  as 
notes  and  drafts. 

IV.  INDORSER'S  RESPONSIBILITY. 

1.  INDORSEMENT  is  a  contract. 

2.  A  TRANSFER  WITHOUT  INDORSEMENT  does  not  render 
the  person  transferring  responsible  for  the  payment. 

3.  An  INDORSEMENT  RENDERS  the  person  who  makes  it 
responsible  for  the  payment. 

4.  An  indorsement  is  a  NEGOTIABLE  contract. 

5.  No  DEMAND  is  necessary  to  make  the  MAKER  of  a  note 
or  the  ACCEPTOR  of  a  draft  responsible. 

6.  To  make  the  INDORSER  of  a  note,  or  the  INDORSER  OR 
DRAWER  of  a  draft  responsible,  the  paper  must  be  PRE- 
SENTED and  payment  DEMANDED  of  the  maker  or  acceptor 
on  the  very  day  when  it  becomes  due. 

7.  If  the  payment  is  refused  NOTICE  of  that  fact  must 
be  given  immediately  to  the  indorser  or  drawer  of  com- 
mercial paper  to  make  him  responsible. 

8.  The  notice  must  be  sent  before  the  end  of  the  NEXT 
DAY  after  the  refusal  to  pay  or  accept  is  made. 


150  Particular  Cases. 


V.  FORGED  PAPER. 

1.  FORGERY  is  the  fraudulently  making  or  altering  of  a 
written  instrument. 

2.  A  forged  instrument  is  NOT  commercial  paper. 

3.  ONE  WHOSE   NAME   is   forged  cannot  be   made   re- 
sponsible. 

4.  Money  paid  under  a  MISTAKE  must  be  refunded. 

VI.  MONEY. 

1.  LEGAL  TENDER  is  that  kind  of  money  which  by  law 
can  be  offered  in  payment  of  a  debt. 

2.  The  legal  tender  of  the  United  States  CONSISTS  sub- 
stantially of  the  United  States  coin,  and  the  United  States 
Notes. 


(Commercial  Paper.  151 


REVIEW  QUESTIONS. 

Commercial  Paper. 

1.  Name  the  three  kinds  of  commercial  paper.     Why  so  called? 

2.  Define  a  note.     Who  is  the  maker?    The  payee? 

3.  Explain  the  usefulness  of  notes. 

4.  What  are  the  four  kinds  of  notes  in  respect  to  their  payee?    To 

how  many  kinds  can  they  be  reduced?    What  are  those  kinds? 

5.  What  effect  has  the  name  of  the  payee  in  form  3? 

6.  What  is  meant  by  "maturity"? 

7.  What  are  "  days  of  grace"?     When  does  a  demand  note  become 

due?  The  note  in  form  3?  What  is  the  effect  if  the  last 
day  of  grace  falls  upon  a  Sunday  or  legal  holiday?  What  are 
the  legal  holidays? 

8.  Who  are  the  two  parties  first  making  a  contract  in  an  order  note? 

In  a  bearer  note?  Explain  how  other  parties  may  assume 
relations  to  the  contract. 

9.  If  a  note  remains  in  the  hands  of  the  party  to  whom  it  is  first 

given  under  what  circumstances  can  he  enforce  it?  Apply 
the  requisites  of  a  binding  contract  to  the  maker's  contract  in 
a  note. 

10.  How  does  its  character  change  on  being  transferred? 

11.  Define  negotiability.     What   effect   does  it  have  upon   paper 

originally  enforceable?  What  effect  upon  paper  void,  on 
account  of  something  appearing  upon  the  paper  itself,  e.g.,  a 
statement  that  it  has  been  paid,  or  that  it  was  given  for  an 
illegal  purpose? 

12.  What  is  an  accommodation  note?     When  enforceable,  and  wher 

not?  When  may  a  note  given  for  an  illegal  purpose  be  ^n- 
forced? 

13.  Under  what  circumstances  may  a  maker  be  compelled  to  pay  a 

note,  when  he  has  already  done  so  once?  How  may  he  avoid 
this  risk? 

14.  Explain  how  negotiability  affects  the  case  of  a  note  held  by  one 

who  also  owes  a  debt  to  the  maker  (case  of  set-off). 
15    Explain  how  it  affects  the  case  of  a  stolen  note.     Why  is  it  pru- 
dent to  make  notes,  checks,  etc.,  which  are  to  be  sent  to  a  dis- 
tance, payable  to  order  instead  of  to  bearer? 


152  Particular  Cases. 

16.  Name  the  kinds  of  conditions  of  negotiability.     What  is  meant 

by  a  "condition  of  negotiability"? 

17.  What  are  the  five  requisites  as  to  form  in  commercial,  paper,  to 

make  it  negotiable?  Is  a  note  binding  on  the  maker  which 
fails  to  comply  with  some  one  of  these  requisites?  What  is 
the  effect  of  such  a  note?  What  is  the  general  purpose  of  the 
formal  requisites? 

18.  How  is  commercial  paper  usually  transferred  when  payable  to 

bearer?  When  payable  to  order?  What  is  indorsement? 
The  two  kinds?  What  is  the  effect  of  a  transfer  without  in- 
dorsement? How  may  an  order  note  become  payable  to  the 
bearer?  How  may  a  bearer  note  become  an  order  note? 

19.  How  long  does  commercial  paper  remain  negotiable?    What  is 

the  effect  of  transferring  a  note  after  it  is  due? 

20.  If  one  receives  negotiable  paper  before  it  is  due,  and  without 

knowledge  of  any  fault  in  it,  but  gives  nothing  for  it,  does  he 
get  any  better  right  to  enforce  it  than  the  one  from  whom  he 
receives  it  had?  Can  one  who  steals  a  bearer  note  sue  upon  it? 

21.  Can  one  who  buys  a  bearer  note  from  the  thief  sue  upon,  it, 

when  he  does  not  know  it  was  stolen?  Can  he,  when  he  has 
reason  to  believe  it  was  stolen? 

22.  What  is  a  draft?    The  drawer?    The  payee?    The  person  drawn 

upon?    A  bill  of  exchange?    Explain  their  use. 

23.  State  some  of  the  different  kinds  of  drafts. 

24.  Name  some  differences  between  a  note  and  a  draft. 

25.  What  is  acceptance?    How  is  it  made?    When?    Who  is  the 

acceptor? 

26.  When  does  a  time  draft  become  due?     A  draft  on  demand?    A 

sight  draft? 

°7.  Can  a  draft  be  transferred  before  acceptance?    After?    How  is 
it  usually  done? 

28.  What  does  a  drawer  agree  in  drawing  a  draft? 

29.  What  is  the  agreement  of  the  person  drawn  upon,  before  accept- 

ance? In  accepting?  Can  the  owner  of  a  draft  sue  the  per- 
son drawn  upon  for  refusing  to  accept? 

30.  Who  is  the  principal  debtor  in  a  note?    In  a  draft  before  accept- 

ance?   In  a  draft  after  acceptance? 

31.  Are  drafts  negotiable  before  acceptance?    After? 

32.  Is  there  any  difference  between  drafts  and  notes,  as  to  the  rules 

of  negotiability? 


Commercial  Paper.  153 

33.  What  two  kinds  of  accommodation  drafts  are  there?    Who  is  the 

accommodated  party  in  each?  Who  is  the  accommodating 
party? 

34.  Can  an  accommodated  party  ever  sue  an  accommodating  party? 

35.  By  the  law  of  what  State  is  a  contract  governed? 

36.  What  is  a  check?     The  drawer?    The  payee?     In  what  particu- 

lars is  a  check  like  a  draft?  How  different  in  its  form?  In 
its  effect?  Explain  the  use  of  checks. 

37.  Is  the  bank  under  any  obligation  to  the  holder  of  an  uncertified 

check?  Why?  Is  it  under  any  obligation  to  the  drawer? 
Why? 

38.  What  is  it  to  "stop  payment"?    Its  effect? 

39.  What  is  the  effect  of  dating  a  check  ahead? 

40.  What  is  certification?     Its  effect   upon   the  bank?    Upon  the 

drawer? 

41.  Are  checks  negotiable? 

42.  State  the  rule  as  to  check  stamps. 

43.  What  is  a  certificate  of  deposit?     What  does  it  most  resemble? 

44.  State  in  order  all  the  conditions  of  negotiability. 

45.  What  is  an  indorser?     State  the  two  purposes  of  indorsement. 

46.  How  is  commercial  paper,  payable  to  bearer,  transferred  so  as 

not  to  make  the  person  transferring  it  responsible  for  it? 
How,  when  payable  to  order? 

47.  Does  the  order  in  which  their  names  appear  on  the  back  of  the 

paper  have  anything  to  do  with  the  parties'  being  respectively, 
first,  second,  etc.,  Indorsers?  What  is  it  that  makes  one  the 
first,  another  the  second  indorser,  etc.? 

48.  What  is  the  contract  one  makes  when  he  indorses  a  note?    An 

unaccepted  draft?  An  accepted  draft?  A  check?  With 
whom  does  he  make  it,  i.e.,  for  whose  benefit?  What  is  the 
effect  of  that? 

49.  When  one  owns  a  piece  of  dishonored  commercial  paper  which 

has  indorsements  of  other  parties  upon  it,  state  whom  he  may 
sue,  if  it  be  a  note?  An  unaccepted  draft?  An  uncertified 
check?  An  accepted  draft?  A  certified  check?  A  certificate 
of  deposit? 

50.  In  each  of  those  cases,  whom  may  each  indorser  hold  responsible 

to  himself?    Can  a  first  indorser  ever  sue  a  second  indorser? 

51.  What  does  "without  recourse"  mean? 

52.  If  the  second  indorser  should  agree  with  the  third  indorser  that 


154  Particular  Cases. 

the  former  should  not  be  responsible  to  the  latter,  could  a 
fourth  indorser  sue  the  second?  Why?  Could  the  third  sue 
the  second?  Why? 

53.  What  is  meant  by  demand  and  notice  in  connection  with  dis- 

honored paper? 

54.  Is  the  maker  of  a"  note  discharged  if  the  owner  neglects  to  make 

demand?  Is  the  acceptor  of  a  draft  ?  The  drawer?  An  in- 
dorser? Who  is? 

55.  To  whom  must  notice  be  sent?    What  is  the  effect  of  not  send- 

ing it? 

56.  What  is  notice  of  non-acceptance?     The  effect  of  omitting  it? 

57.  What  is  the  effect  if  the  owner  sends  notice  to  some  indorsers 

and  not  to  others? 

58.  When  must  demand  be  made,  in  paper  due  at  a  particular  time? 

In  checks?  Upon  whom  must  demand  be  made,  in  a  note? 
In  a  draft?  In  a  check?  By  whom  may  the  demand  be 
made? 

59.  When  must  the  notice  be  sent?    How  may  it  be  sent?    To  where? 

What  should  it  say? 

60.  When  an  indorser  receives  notice  of  the  dishonor,  what  should 

he  do  to  protect  himself? 

61.  What  is  protest? 

62.  What  is  forgery?    Is  an  alteration  forgery?    Is  an  accidental 

alteration  forgery? 

63.  What  is  the  effect  of  a  forgery  upon  the  one  whose  name  is 

forged?  If  he  recognizes  the  forgery  as  genuine  and  pays  the 
money,  can  he  recover  it  from  the  one  to  whom  he  pays? 

64.  State  the  two  cases  in  which  one  is  bound  by  his  recognition  of  a 

forged  signature  as  genuine. 

65.  If  one  transfers  forged  paper  without  indorsing  it,  has  he  any 

responsibility  with  regard  to  it  afterwards? 

66.  What  is  the  effect  of  paying  a  note  where  the  amount  has  been 

raised  by  forgery?  Of  accepting  a  raised  draft?  Of  certify- 
ing a  raised  check?  Of  paying  a  raised  draft  or  check? 

67.  What,  is  money?    The  kinds  in  the  U.  S.  ? 

68.  What  is  the  difference  between  money  and  legal  tender?    What 

part  of  our  money  is  legal  tender? 


DIVISION  III. 
MISCELLANEOUS   CASES. 


CHAPTEE  XXVIII. 

AGREEMENTS   FOE    PERSONAL   SERVICES. 

1.  Kinds. — The  agreement  to  work  for  another,  i.e.,  to 
render  services  for  wages,  or  a  salary,  or  other  compensation, 
is  a  very  common  kind  of  contract  in  business  life.     These 
contracts  may,  for  our  present  purpose,  be  divided  into  two 
general  classes,  agreements  (1)  to  do  some  particular  thing, 
and  (2)  to  do  whatever  the  employer  may  direct.     Brokers, 
commission   merchants,  lawyers,  tradesmen,*    and  many 
others  belong  to  the  first  class ;  clerks  and  all  others  em- 
ployed to  do  general  work  belong  to  the  second  class.     The 
act  of  employing  in  both  classes  is  a  contract,  in  which  each 
party,  the  employer  and  the  employe,!  agrees  to  do  certain 
things.     The  following  sections  of  this  chapter  will  show 
the  important  elements  of  such  a  contract. 

2.  Compensation. — Every  agreement  to  employ  contains 
an  agreement  to  pay  for  the  services.     This  is  the  most  im- 
portant part  of  the  employer's  agreement,  and  it  is  either 
express  or  implied.     If  the  parties  fix  the  compensation 
themselves  beforehand,  that  controls;  but  where  nothing 
is  said   about  whether  the  services  will   be  paid  for,  or 
how  much  will  be  paid,  nevertheless  such  a  contract  is  al- 

*  Who  make  or  repair  articles,  as,  for  instance,  a  jeweler  employed 
to  repair  a  watch, 
f  Using  these  terms  with  reference  to  both  classes. 


156  Particular  Cases. 

ways  implied.     WHEN  SERVICES  ARE  REQUESTED  THERE  is 

ALWAYS  AN    IMPLIED   CONTRACT  TO    PAY  WHAT  THEY   ARE 

WORTH,  i:c.,  the  usual  amount  paid  for  such  services  else- 
where. This  is  similar  to  the  rule  in  sales  (p.  91).  Un- 
less there  is  a  special  agreement  for  payment  in  advance, 
the  person  employed  is  entitled  to  no  pay  until  the  whole 
service  has  been  rendered. 

3.  Employe's  Agreement. — The  person  employed  must 
fulfill  his  agreement,  but  if  anything  else  is  asked  of  him 
he  need  not  do  it.      IT  is  AN  IMPLIED  PART  OF  EVERY 

AGREEMENT  TO  RENDER  SERVICES  THAT  THE  WORK  WILL  BE 
DONE  WITH  ORDINARY  SKILL,  CARE,  AND  DILIGENCE.  If 

the  person  employed  fails  to  carry  out  his  contract  in  any 
respect ;  if,  for  instance,  the  jeweler  fails  to  repair  the 
watch  as  soon  as  he  agreed  to  or  does  it  carelessly,  he  is  en- 
titled to  no  compensation,  no  matter  how  much  he  has 
done.  (See  p.  23,  sec.  9.)  In  ordinary  commercial  trans- 
actions, if  I  agree  to  do  a  thing,  it  is  fulfilling  my  agree- 
ment to  get  some  one  else  to  do  it  ;  but,  of  course,  I  am 
responsible  for  all  my  agent  does,  and  for  his  want  of  skill, 
care,  or  diligence. 

4.  Skill. — Any  one  by  engaging  in  any  kind  of  business 
represents  that  he  and  his  clerks  or  workmen  have  the  de- 
gree of  skill  ordinarily  required  in  that  business.     He  does 
not  therefore  agree  to  use  all  possible  skill,  but  only  such 
as  is  ordinarily  possessed. 

5.  Care. — This  rule  as  to  care  applies  particularly  to  cases 
where  the  person  employed  is  to  render  some  services  in 
connection  with  certain  property  belonging  to   the  other 
party,  such  as  those  who  repair  articles,  or  warehousemen, 
who  take  goods  on  storage,  or  forwarding  merchants,  etc. 
The  care  required  in  handling  the  property  is  ordinary 
care,  i.e.,  so  much  as  an  ordinarily  careful  person  takes  of 
his  own  property.     It  is  therefore  not  enough  to  take  as 


Personal  Services.  157 

much  care  of  others'  property  as  you  take  of  your  own,  un- 
less you  are  a  careful  person. 

6.  Loss  or  Injury. — When  one  has  another's  property  in 
his  possession  and  through  his  carelessness  it  is  lost  or  in- 
jured, the  careless  one  is  not  only  entitled  to  no  compen- 
sation for  what  he  has  done,  but  must  compensate  the 
owner  for  his  loss  or  injury.     But  if  the  loss  or  injury  oc- 
curs in  spite  of  ordinary  carefulness,  then  the  owner  must 
not  only  bear  his  own  loss  but  must  pay  for  whatever  ser- 
vices were  rendered.* 

7.  Lien. — ANY  ONE  HAVING  THE  PEOPERTY  OF  ANOTH- 
ER IN  HIS  HANDS  UPON  WHICH  HE   HAS    DONE   WORK    MAY 
KEEP  IT  UNTIL  HE  IS  PAID  FOR  HIS  WORK.    Ill  other  Words, 

he  has  a  lienf  upon  it  for  his  pay.  Thus,  a  bookbinder 
may  retain  books  that  he  has  bound,  a  warehouseman  may  re- 
tain goods  stored  with  him,  each  until  his  charges  (if  correct) 
are  paid.  Machinists,  carpenters,  jewelers,  and  all  kinds  of 
manufacturers  and  repairers  have  this  right.  This  kind  of 
lien  applies  to  one  who  carries  on  a  regular  trade  or  business, 
and  it  exists  under  three  conditions  only,  (1)  when  he  has 
possession  of  the  property,  and  (2)  has  performed  some  ser- 
vice in  connection  with  it  at  the  owner's  request,  and  (3) 
it  has  not  been  paid  for.  If  he  lets  it  go  he  loses  his 
lien.  If  he  has  not  done  the  work  as  ordered  he  has  no 
lien.  If  payment  is  made  the  lien  ends. 

8.  Length  of  Employment. — In  the  second  class  of  cases, 
where  one  is  employed  to  perform  a  general  class  of  duties, 
the  time  for  which  he  is  hired  is  an  important  element. 
This  may  be  for  any  time,  a  day,  a  month,  a  year,  or  longer. 

*  Thus,  if  a  jeweler  repairs  my  watch,  but  before  I  call  for  it  his 
store  is  entered  by  burglars  and  my  watch  is  stolen,  I  must  bear  the 
loss  (unless  the  store  were  carelessly  left  unprotected),  and  must  also 
pay  his  charges  for  the  repairs. 

f  For  other  illustrations  of  lien  see  pp.  93,  99. 


158  Particular  Cases. 

Very  often  no  time  is  specified  in  so  many  words.  In  such 
case,  the  time  when  payment  is  to  be  made  will  indicate  the 
length  of  employment.  Thus,  if  a  clerk,  messenger,  etc., 
is  hired  for  no  fixed  time  but  at  so  many  dollars  a  week,  or 
a  month,  it  is  a  hiring  for  a  week  or  a  month  respectively. 
If  the  work  goes  on  the  next  week  or  month  in  the  same 
manner,  it  is  a  new  contract  on  the  same  terms.  Thus,  it 
is  as  if  the  employer  said  at  the  beginning  of  each  period, 
"  I  agree  to  pay  you  ....  dollars  if  you  will  work  this  week 
[or  month],"  and  the  employe  answered,  "  I  agree  to  work 
this  week  [or  month]."  When  the  contract  ends,  i.e., 
when  the  week  or  the  mouth  expires,  each  party  may  do  as 
he  chooses.  There  is  no  obligation  to  renew  it. 

9.  Discharge. — We  have  just  seen  that  an  employe  may 
be  discharged  at  the  end  of  his  time,  without  any  cause,  and 
without  notice.     Thus,  if  hired  at  so  much  a  week  and  for 
no  definite  time,  he  may  be  discharged  at  the  end  of  any 
week.     He  may  also  be  discharged  during  the  week  or  other 
period,  and  has  no  right  to  insist  upon  working  after  he  is 
discharged.     But  in  that  case  if  the  discharge  is  without 
good  cause,  i.e.,  if   he  was  properly  performing  what  he 
agreed  to,  he  is  entitled  to  payment  for  the  whole  period. 
If,  however,  there  was  good  reason  for  the  discharge,  arising 
from  his  own  fault,  he  is  entitled  to  no  pay  for  any  of  that 
period. 

10.  Leaving. — Similar  rules  apply  where  the  employe 
leaves  of  his  own  accord.     He  can  leave  at  the  end  of  the 
time  without  giving  notice.     But  if  he  leaves  before  the 
time  has  expired  he  is  entitled  to  no  pay  for  that  period,  no 
matter  how  much  of  it  he  had  worked  there.     Thus,  if  he 
agreed  to  stay  a  month  and  left  at  the  end  of  three  weeks, 
he  would  be  entitled  to  nothing.     In  short,  each  party  must 
keep  his  contract  if  the  other  does,  but  need  not  if  the  other 
does  not. 


Transportation.  159 


CHAPTER  XXIX. 

TRANSPORTATION    OF   GOODS. 

1.  The  Business  of  the  transportation  of  freight  from 
place  to  place  is,  in   this  country,    of  great  importance. 
Those  who  transport  goods  for  others  are  called  carriers, 
and  since  all  the  business  is  done  under  contract,  such  con- 
tracts are  very  numerous.     They  are  contracts  for  personal 
services.     Generally,  all  the  rules  of  contracts  which  we  have 
already  considered  apply  to  them,  with  a  few  exceptions, 
which  will  be  mentioned  in  this  chapter.     The  rules  of 
agency  are  peculiarly  applicable  here,  for  in  almost  every 
case  the  actual  work  is  done,  not  by  the  carrier  but  by  his 
agents,  i.e.,  workmen,  clerks,  etc. 

2.  Common  Carriers. — Those  engaged  in  this  business  are 
also  called  common  carriers.     A  COMMON  CARRIER  is  ONE 

WHOSE  BUSINESS  IS  TO  TRANSPORT  FROM  PLACE  TO  PLACE 
THE  GOODS  OF  ANY  ONE  WHO  MAY  EMPLOY  HIM.*  The  most 

common  ones  are  the  railroad,  steamboat,  steamship,  and 
express  companies.  Truckmen  and  others,  in  cities,  who 
offer  their  services  to  the  public  generally,  are  also  common 
carriers.  There  are  two  elements  necessary  to  constitute 
one  a  common  carrier,  (1)  his  following  it  as  a  business, 
and  (2)  his  offering  his  services  to  the  public  generally. 
Thus,  a  carman  who  works  only  for  a  particular  person  is 
not  a  common,  but  &  private  carrier. 

3.  Obligation  to  Take. — A  COMMON  CARRIER  is  OBLIGED 

*  The  word  "  he"  is  used  in  this  chapter  for  convenience's  sake. 
It  is  meant  to  include  individuals,  firms,  and  corporations  alike. 
Thus  a  railroad  company  is  a  common  carrier,  its  officers,  engineers, 
brakemen,  etc.,  being  its  agents. 


160  Particular  Cases. 

BY  LAW  TO  TAKE  ANY  GOODS  THAT  ARE  OFFERED  TO  HIM 
FOR  TRANSPORTATION  TO  ANY  POINT  ON  HIS  ROUTE,  pro- 

vided  his  usual  compensation  is  offered  him  in  advance. 
Ordinarily  people  are  free  to  make  or  not  to  make  contracts 
with  whom  they  choose  (p.  18),  but  this  exception  is  made 
for  the  benefit  of  the  public.  But  where  the  carrier's  cars 
or  other  conveyances  are  full  he  may  refuse  to  take  more  ; 
so  also  he  may  refuse  to  take  freight  of  a  dangerous  charac- 
ter, such  as  explosives. 

4.  Compensation. — Ordinarily  carriers  may  establish  such 
rates,  or  make  such  contracts,  as  they  choose.     The  large 
corporations,  like  railroad  companies,  usually  have  estab- 
lished schedules  of  rates.     These   they  can  change  from 
time  to  time,  but  they  must  accept  the  goods  of  all  per- 
sons at  those  rates.     They  cannot  demand  more  from  par- 
ticular persons  than  from  others,  but  must  treat  all  alike. 
Very  often  the  State  provides  a  maximum  rate,  which  they 
are  not  allowed  to  exceed.     It  is  now  a  debated  question 
whether  the  railroads  of  the  country  should  be  left  free  to 
compete  or  combine  with  each  other,  or  should  be  brought 
more  under  the  control  of  law  as  to  their  rates. 

5.  Who  must  Pay. — Though  common  carriers  may  de- 
mand their  pay  (often  called  freight)  in  advance,  yet  it  is 
common  for  them  to  transport  the  goods  and  collect  the 
freight  from  the  person  to  whom  they  are  transported.     But 
if  he  refuses  to  pay  then  the  question  may  arise,  Who  is 
responsible  to  the  carrier  for  the  freight,  the  sender  or  the 
one  to  whom  they  are  sent?    This  question  is  solved  by  ask- 
ing, With  whom  did  the  carrier  make  his  contract?    Now, 
usually  the  contract  is  made  only  with  the  sender ;  the 
other  party  makes  no  contract  with  the  carrier.     Therefore 
the  carrier  can  only  sue  the  sender.     Thus,  if  Jones  in  New 
York  takes  goods  to  a  railroad  depot  and  asks  the  company 
to  carry  them  to  Brown  &  Co.  in  San  Francisco  the  only, 


Transportation.  161 


contract  is  the  one  between  Jones  and  the  company.*  But 
sometimes  the  sender  is  acting  as  the  agent  of  the  per- 
son to  whom  they  are  to  be  sent,  and  then  the  company 
may  sue  the  latter,  for  the  contract  is  made  with  him.f 

6.  Carrier's  Lien. — But  common  carriers  have  still  an- 
other way  to  obtain  their  pay.     COMMON  CAKKIERS  MAY 

KEEP   THE  GOODS    THEY   HAVE  TRANSPORTED  UNTIL    THEIR 

CHARGES  ARE  PAID.  In  other  words,  they  have  a  lien  upon 
the  goods.  Thus  there  are  three  ways  in  which  a  carrier 
may  enforce  payment  of  his  freight:  (1)  he  may  refuse  to 
take  the  goods  unless  payment  is  made  in  advance;  (2)  he 
may  transport  them  and  then  keep  them  until  paid;  and 
(3)  he  may  transport  and  deliver  them,  and  then  sue  the 
person  with  whom  he  made  his  contract. 

7.  Loss  or  Injury. — COMMON  CARRIERS  ARE  RESPONSIBLE 

FOR    ANY    LOSS  OR  INJURY   OCCURRING    TO   GOODS   WHICH 

THEY  ARE  TRANSPORTING.  Ordinarily,  as  we  have  seen, 
(p.  157,  sec.  6),  a  person  having  the  goods  of  others  in  his 
possession  is  not  responsible  for  the  loss  unless  it  is  caused 
by  his  negligence  or  that  of  his  servants,  but  with  the  com- 
mon carrier  the  rule  is  more  strict.  He  has  complete  con- 
trol over  the  goods  as  if  they  were  his  own,  and  if  while  in 
his  possession  they  suffer  injury  it  is  his  loss.  It  makes  no 
difference  how  much  care  he  takes,  nor  what  the  cause  of 
the  loss  may  be.  If  any  injury  occurs  he  must  pay  for  it, 

*  This  contract  is  often  written,  and  is  called  a  receipt  or  bill  of 
lading.  (See  p.  163  for  the  kind  used  in  marine  business.) 

•j-  This  question,  Whom  may  the  carrier  sue,  is  not  the  same  as  the 
one,  Who  is  finally  responsible  for  the  freight?  The  latter  is  wholly 
a  matter  of  agreement  between  the  sender  and  the  one  to  whom  they 
are  sent.  That  one  must  finally  pay  who  between  them  has  agreed 
to,  and  the  ordinary  rule  is  that  where  one  buys  goods  and  orders 
them  to  be  sent  to  him,  he  impliedly  agrees  to  pay  for  the  trans- 
portation. Thus  if  Brown  &  Co.  had  agreed  witli  Jones  to  pay,  and 
the  company  had  compelled  Jonea  to  pay,  he  might  sue  Brown  &  Oo. 


162  Particular  Cases. 

unless  it  occurs  through  the  fault  of  the  sender,  as  on  ac- 
count of  careless  packing,  etc.  Yet  if  a  package'  is  of  very 
great  value,  as  for  instance  a  package  of  money,  the  carrier 
must  be  informed  beforehand  of  its  value  or  he  will  not  be 
responsible  for  its  loss. 


CHAPTEE  XXX. 

SHIPPING. 

1.  In  General. — By  shipping  is  meant  any  kind  of  ves- 
sel, whether  navigating  the  ocean,  or  rivers,  or  lakes,  and 
whether  propelled  by  sails  or  steam.     There  are  two  classes 
of  persons  concerned  in  the  law  of  shipping,  (1)  the  owners 
of  vessels,  and  (2)  the  owners  of  the  goods  shipped.    Since 
shipping  is   the   transportation  of  goods  by  water,  ship- 
owners are  carriers:  those  who  send  their  goods  are  called 
shippers.     Sometimes  the  owner  of  a  ship  instead  of  send- 
ing it  out  himself  lets  it  to  another  person.     The  latter  is 
said  to  charter  the  vessel,  and  the  contract  made  between 
him  and  the  ship-owner  is  called  a  charter-party  (form 
23,  p.  288).     He  then  becomes  the  carrier  in  place  of  the 
shipowner.* 

2.  Common  Carriers. — Those  who  offer  to  carry  the  goods 
of  any  one  are,  as  we  have  seen,  common  carriers.     Where 
ship-owners  or  charterers  offer  to  do  this,  their  rights  and 
responsibilities  are  the  rights  and  responsibilities  of  com- 
mon carriers,  which  need  not  be  repeated  here. 

The  rules  of  law  governing  shipping  are  therefore  chiefly 

*  If  a  person  carries  his  own  goods  in  his  own  ship,  or  one  he  has 
chartered,  he  is  of  course  his  own  carrier* 


Shipping.  163 

those  governing  transportation  by  land,  and  in  this  chapter 
we  will  only  notice  a  few  rules  peculiar  to  shipping. 

3.  A  Bill  of  Lading  is  a  document  delivered  by  the  master 
(or  owner)  of  a  vessel  to  one  sending  goods  by  it  (called  the 
consignor*'  or  shipper),  acknowledging  that  they  have  been 
received  upon  the  vessel  for  transportation.    It  constitutes 
the  contract  between  the  shipper  and  the  carrier.     The 
shipper  then  sends  the  bill  of  lading  to  the  person  to  whom 
the  goods  are  to  be  transported  (called  the  consignee  *),  and 
it  serves  as  evidence  of  his  right  to  receive  the  goods  when 
they  arrive.    When  he  receives  the  goods  he  delivers  up  the 
bill  of  lading  (form  24,  p.  288). 

4.  Its  Transfer.  —  The  bill  of  lading  stands  as  the  repre- 
sentative of  the  goods,  and  in  a  certain  sense  it  may  be 
considered  property  itself,  belonging  to  the  consignee.  Like 
commercial  paper  the  consignee  may  indorse  it  and  trans- 
fer it  to  some  one  else,  even  before  the  goods  arrive,  and 
the  goods  then  belong  to  the  one  to  whom  it  is  transferred. 
TRANSFER  OF  THE  BILL  OF  LADING  CARRIES  THE  OWNER- 
SHIP OF  THE  GOODS.     Thus  in  form  24,  Willoughby  may 
indorse  it  in  full  or  in  blank,  and  the  final  holder  of  the 
bill  may  demand  the  goods  when  they  arrive. 

5.  Loss  or  Injury.  —  According  to  the  general  rule  as  to 
common  carriers,  carriers  by  sea  would  be  responsible  for 
any  loss  or  damage  which  the  goods  might  suffer  on  the 
voyage,  whether  it  was  caused  by  the  negligence  of  their 
agents,  the  master  and  crew,  or  not  (p.  161,  sec.  7).     But 
they  are  an  exception  to  this  rule  in  one   respect,   viz., 

CARRIERS    BY    SEA    ARE    NOT    RESPONSIBLE    FOR    DAMAGES 
WHICH    OCCUR   THROUGH    SOME   EXTRAORDINARY  PERIL  OF 

THE  SEA.     Thus,  if  I  ship  goods  on  a  vessel  and  they  are 
lost  through  a  violent  storm,  or  piracy,  or  fire  at  sea,  the 


*  Pronounced  con,-si-nor  , 


164  Particular  Cases. 

carrier  is  not  responsible  to  me.  I  took  the  risk  of  extra- 
ordinary perils,  and  must  bear  the  loss  unless  I  have  in- 
sured my  goods  (Chap.  XXXII. ). 

6.  General  Average. — The  occasion  will  sometimes  arise 
upon  a  voyage  when  it  becomes  necessary  to  sacrifice  some 
part  of  the  cargo,  or  vessel,  in  order  to  save  the  rest.  Thus, 
perhaps  in  a  storm  the  vessel  must  be  lightened  by  throw- 
ing overboard  some  of  the  cargo,  or  the  spars  must  be  cut 
away.     Now,  it  would  be  highly  unjust  to  let  those  who 
owned,  the  part  sacrificed  to  bear  ull  the  loss,  if  by  means 
of  it  the  rest  was  saved.     If  the  cutting  away  of  the  spars 
saved  the  ship  and  the  cargo,  the  owners  of   the  cargo 
ought  to  share  in  the  loss,  since  they  share  in  the  benefit. 
Therefore,  the  law  is  that  IF  ANY  PART  OF  THE  VESSEL  OB 

CARGO  IS  VOLUNTARILY  SACRIFICED  TO  SAVE  THE  REST, 
ALL  THE  OWNERS  OF  BOTH  VESSEL  AND  CARGO  MUST  BEAR 
THAT  LOSS  IN  PROPORTION  TO  THEIR  INTERESTS.  Such  a 

loss  is  called  general  average.  *  Instead  of  a  loss  of  prop- 
erty it  may  be  an  expense  incurred  for  the  benefit  of  all, 
which  all  must  share,  f 

7.  Three  Conditions. — But  it  must  be  noted  that  it  is 
not  every  loss  which  is  thus  distributed.     Three  conditions 
are  essential  to  make  it  a  general  average:  (1)  the  sacrifice 

*  Average  in  this  connection  means  loss.  A  general  average  is  one 
distributed  among  all:  a  particular  average,  one  which  is  not  of  a 
nature  to  be  distributed. 

f  Suppose  A  owns  a  vessel  worth  $50,000,  which  has  on  board  u 
cargo  worth  $50,000,  owned  by  the  following  persons:  B  $10,000,  C 
$20,000,  D  $5000,  and  E  $15,000.  Suppose  that  $10,000  worth  of  C's 
goods  are  thrown  overboard:  A,  B,  D  and  E  must  pay  their  share  of 
the  loss  to  C;  i.e.,  A  must  pay  $5000,  B  $1000,  D  $500,  and  E 
$1500,  making  altogether  $8000,  which  leaves  C's  final  loss  $2000. 
In  other  words  the  whole  vessel  and  cargo  being  worth  $100,000,  and 
the  loss  being  $10,000,  each  owner,  including  C,  loses  one-tenth  of 
his  property. 


Insurance.  165 


must  be  necessary;  (2)  it  must  be  made  voluntarily;  and 
(3)  the  design  must  succeed,  i.e.,  the  rest  of  the  vessel  or 
cargo  must  be  saved  by  it.  If  an  incompetent  captain 
should  throw  over  goods  when  it  was  not  necessary,  the 
carrier  might  be  responsible,  but  the  owner  of  the  goods 
would  have  no  general  average  claim  against  the  owners  of 
other  goods  on  board.  So  also,  if  they- are  washed  over- 
board, or  if  after  a  voluntary  sacrifice  is  made  it  proves  to 
be  of  no  avail,  there  is  no  general  average  claim. 

8.  Salvage  relates  to  property  abandoned  at  sea.  On  land 
the  finder  of  an  article  must  surrender  it  to  the  owner, 
and  is  entitled  to  nothing  for  his  services;  but  ANY  ONE 

SAVING  PROPERTY  WHICH  HE  FINDS  ABANDONED  AT  SEA 
IS  ENTITLED  TO  LARGE  COMPENSATION  FOR  HIS  SERVICES. 

This  compensation  is  called  salvage,  and  its  object  is  to 
encourage  such  services,  which  are  usually  attended  with 
danger.  The  amount  of  salvage  varies  according  to  the 
difficulty,  sometimes  amounting  to  one-half  of  the  value  of 
the  vessel  and  cargo  saved.  All  who  take  part  in  the  sav- 
ing have  a  share  of  the  salvage,  viz.,  the  master,  crew  and 
owners  of  the  saving  vessel.  When  a  vessel  is  found  in 
great  distress,  though  not  actually  abandoned,  and  aid  is 
rendered,  salvage  is  allowed. 


CHAPTER  XXXI. 

FIRE  INSURANCE. 

1.  Insurance  is  a  contract;  an  agreement  by  which  one 
assumes  a  certain  risk  which  another  would  otherwise  bear. 
Thus  the  owner  of  property  risks  its  destruction  by  fire, 
and  the  insurance  company  assumes  that  risk  by  agreeing 


166  Particular  Cases. 

to  pay  for  any  loss.    FIRE  INSURANCE  is  A  CONTRACT  TO 

INDEMNIFY  THE   OWNER*  OF   CERTAIN    PROPERTY   IF    IT   IS 

DAMAGED  OR  DESTROYED  BY  FIRE.  Any  one  may  make 
that  contract,  and  it  may  be  either  oral  or  written,  but  the 
business  is  now  almost  universally  carried  on  by  companies, 
incorporated  for  the  purpose,  using  written  contracts  called 
policies.  The  company  issuing  the  policy  is  called  the  in- 
surer or  underwriter;  the  one  to  be  indemnified  is  called 
the  insured.* 

2.  The  Contract  has  two  parties.  (1)  the  owner  of  the 
property,  and  (2)  the  company.     The  chief  elements  of  it 
are  as  follows:  The  owner  agrees  to  pay  to  the  company  a 
certain  sum  of  money  called  the  premium,  in  any  event;  and 
the  company  agrees  to  pay  him  whatever  his  damage  amounts 
to  if  there  is  a  fire,  unless  the  damage  exceeds  a  certain 
amount,  which   is  named  in  the  policy   (sec.  8).     That 
amount  far  exceeds  the  premium.     Thus,  if  there  is  a  fire 
the  company  may  have  to  pay  many  times  as  much  as  the 
premium  it  received;  but  on  the  other  hand  if  there  is  no 
fire  it  gains  the  whole  premium  (form  25,  p.  289). 

3.  The  Time  for  which  the  insurance  is  to  last  is  always 
specified  in  the  policy.     It  may  be  made  for  any  time,  but 
is  usually  made  for  one,  two,  or  three  years.     At  the  end  of 
the  time  a  renewal  is  often  issued  (p.  290).     This  is  merely 
to  save  the  labor  of  issuing  a  new  policy,  and  it  has  just 
the  same  effect  as  a  new  policy. 

4.  The  Risks. — The  policy  reads,  "  The Company 

do  insure  Edward  A.  Bradford  against  loss  or  damage  by 
fire."     This  includes  not  only  damage  done  by  the  fire  it- 
self, as  by  burning,  charring,  cracking,  etc.,  but  also  all 
that  results  directly  from  the  fact  of  there  having  been  a 
fire.     THE   COMPANY  is   RESPONSIBLE  FOR  ALL  DAMAGE 

*  Assure  means  the  same  as  inture. 


Insurance.  1C7 


DONE   BY   THE   FIRE,  OE   DONE   IN   PUTTING  OUT  THE  FIRE. 

Very  frequently  the  water  used  to  put  it  out  causes  more 
damage  than  the  fire  itself;  that  is  covered  by  the  policy, 
even  though  the  fire  is  not  in  the  same  building.  The  fire 
is  the  cause,  because  the  damage  would  not  have  been  done 
if  there  had  been  no  fire. 

5.  Payment  of  Premium. — The  parties  may  make  any 
agreement  they  choose  as  to  when  the  premium  shall  be 
paid.     It  is  quite  common  for  the  policy  to  provide  that  it 
shall  not  go  into  effect  until  the  premium  is  paid,  and  in 
such  case,  though  one  has  his  policy,  yet  he  has  no  insur- 
ance until  the  company  is  paid  the  premium.*     But  with- 
out such  a  provision  the  policy  is  binding  before  payment  is 
made.     The  company  may  sue  for  it,  and  if  there  is  a  fire 
before  it  is  paid,  it  is  deducted  from  the  amount  of  the 
loss.     In  other  words,  each  party  must  keep  his  agreement. 

6.  Ownership. — One  may  insure  property  which  he  owns, 
and  also  any  in  which  he  has  any  interest,  as  by  holding  a 
mortgage  upon  it.     But  in  the  latter  case  it  is  quite  com- 
mon for  the  owner  to  obtain  the  insurance  and  have  the 
policy  provide  that  the  loss,  if  any,  shall  be  paid  to  the  one 
holding  the  mortgage.     If  a  person  sells  property  covered 
by  a  policy  of  insurance,  the  person  buying  it  does  not  get 
the  benefit  of  that  policy  unless  the  company  is  notified  of 
the  sale  and  assents  to  a  transfer  of  the  policy. 

7.  Change  of  Risk. — When  a  company  issues  its  policy 
insuring  certain  property,  the  amount  of  premium  is  based 
upon  the  degree  of  danger  there  is  of  fire.     If  that  danger 
could  be  increased  by  the  owner  of  the  property,  the  com- 
pany might  be  subjected  to  a  greater  risk  than  it  would 
have  assumed  for  that  premium.     Consequently  it  is  not 

*  If  the  owner  of  the  property  pays  the  premium  to  his  broker,  as 
is  often  done,  that  is  not  paying  the  company  until  the  broker  pays 
it  over  to  the  company.  (Sec  sec.  13.) 


168  Particular  Cases. 

allowed  to  an  owner  to  increase  the  risk.  If  the  risk  is 
increased  by  anything  he  does  his  policy  becomes  void. 
Even  the  repairing  or  altering  a  house,  or,  if  personal  prop- 
erty, changing  it  from  one  place  to  another,  may  under 
some  circumstances  make  the  policy  void.  THE  PRUDENT 

EULE  IS  ALWAYS  TO  OBTAIN  THE  COMPANY'S  CONSENT  TO 
ANY  CHANGE  IN  THE  PROPERTY,  ITS  POSITION,  OR  ITS 

OWNERSHIP.  Having  given  their  consent  they  cannot 
complain  afterwards. 

8.  The  Amount  of  the  policy  may  be  any  which  the 
parties  choose.     Its  effect  is  to  limit  the  liability  of  the 
company  to  that  amount  in  any  event.     Some  owners  will 
prefer  to  be  fully  insured,  i.e.,  to  have  the  amount  of  in- 
surance equal  to  the  value  of  the  property;  some  will  take 
some  risk  themselves.     In  any  case  the  company  pays  only 
the  amount  of  the  loss,  and  never  more  than  the  amount 
of  the  policy.     THE  AMOUNT  TO  BE  PAID  IN  FIRE  INSUR- 
ANCE IS  THE  AMOUNT  OF  THE  LOSS,  UNLESS  THAT  EXCEEDS 
THE  AMOUNT  OF  THE  POLICY,  AND  THEN  ONLY  THE  AMOUNT 

OF  THE  POLICY.  Thus,  if  the  policy  is  for  $2000,  and  the 
loss  is  $50,  it  pays  $50,  and  the  policy  becomes  one  for 
$1950  for  the  remainder  of  the  time.  If  the  loss  is  $3000, 
it  pays  $2000,  and  the  policy  is  wholly  discharged.  But 
many  companies  will  not  issue  policies  of  more  than  $5000 
or  $10,000  in  amount  on  the  same  property,  and  if  a  person 
wishes  to  insure  some  property  (as  for  instance  a  large 
building)  for  more  than  that,  he  must  often  obtain  separate 
policies  from  several  companies. 

9.  Insurance  in  Several  Companies. — In  that  way  a  per- 
son may  obtain  full  insurance,  however  valuable  his  prop- 
erty is.     If  a  fire  occurs  where  the  property  is  insured  in 
several  companies,  and  the  damage  is  more  than  the  amount 
of  all  the  insurance,  each  company  must  pay  the  amount 
of  its  policy;  but  if  the  damage  is  less  than  the  amount  of 


Insurance.  169 


the  insurance,  then  the  question  arises,  Which  company 
shall  pay?  This  is  usually  provided  for  in  the  policies 
themselves,  and  the  ordinary  rule  is  that  IN"  FIRE  INSUR- 
ANCE EACH  COMPANY.  WHERE  THERE  ARE  SEVERAL,  MUST 
PAY  THAT  PROPORTION  OF  THE  LOSS  WHICH  ITS  POLICY  BEARS 
TO  THE  WHOLE  AMOUNT  OF  INSURANCE.  It  is  of  HO  moment 

which  policy  was  issued  first.  But  in  no  event  can  any 
company  be  compelled  to  pay  more  than  the  amount  of  its 
policy.* 

10.  Negligence. — It  is  ordinarily  the  rule  in  law  that  a 
person  must  himself  bear  the  consequences  of   his  own 
negligence,  or  that  of  his  employe's,  but  in  fire  insurance 
we  find  this  rule  modified.    Perhaps  most  fires  occur  through 
the  negligence  of  some  one,  and  it  is  just  the  result  of  that 
possible  negligence  which  the  owner  of  property  wishes  to 
insure  himself  against.     Consequently  the  company  must 
pay  even  though  the  fire  was  caused  by  carelessness.     That 
is  what  it  agrees  to  do.     But  one  cannot  intentionally  burn 
his  own  property  for  the  sake  of  getting  the  insurance. 
That  is  fraud.     Nor  can  one  allow  his  property  to  burn 
after  a  fire  has  started.     His  policy  becomes  void  unless  he 
does  all  he  can  to  save  the  property. 

11.  Any  Misrepresentations  at  the  time  the  policy  is  made, 
as  to  the  character  of  the  property,  or  the  danger  of  fire  to 
which  it  will  be  exposed,  make  the  policy  void.     This  is 
only  an  application  of  the  rule  that  no  fraudulent  contracts 
are  binding  (p.  22). 

12.  Additional  Agreements.  —  Every    policy    contains 

*Thus,  if  property  worth  $50,000  is  insured  in  one  company  on 
January  9th  for  $10,000,  and  in  another  on  July  15th  for  $15,000, 
and  a  fire  occurs  on  July  17th,  in  which  $25,000  or  more  is  lost,  the 
first  company  pays  $10,000,  and  the  second  $15,000;  if  the  loss  is 
$5000,  the  first  pays  $2000  and  the  second  $3000;  if  the  loss  is  $40,- 
000,  each  pays  the  amount  of  its  policy  (form  25,  clause  (4)). 


170  Particular  Cases. 

agreements  or  conditions  additional  to  the  main  agreement 
of  insurance,  which  act  as  restrictions  upon  the  owner;  as 
for  instance  that  no  gunpowder  or  kerosene  oil  shall  be 
kept  on  the  premises  insured,  or,  if  a  house,  that  it  shall  not 
become  vacant,  or  that  the  company  shall  be  notified  of  any 
other  insurance  obtained  (see  p.  289).  These  are  all  a  part 
of  the  contract,  and  must  be  strictly  observed.  When  a 
loss  occurs  notice  must  be  given  immediately  to  the  com- 
pany. 

13.  Agency. — The  rules  of  agency  are  especially  impor- 
tant in  insurance.  The  companies  sometimes  have  their 
agents  in  different  cities,  who  issue  the  policies  and  do  all 
the  business  there:  owners  very  frequently  do  their  part 
through  insurance  brokers.  The  company  must  abide  by 
all  its  agent  does,  and  the  owner  by  all  his  broker  does. 


CHAPTER  XXXII. 

MARINE     INSURANCE. 

1.  The  Business  of  marine  insurance  relates  to  vessels 
and  their  cargoes.     MARINE  INSURANCE  is  A  CONTRACT  TO 

PAY  THE  OWNER  OF  CERTAIN  PROPERTY  A  CERTAIN  PRO- 
PORTION OF  HIS  LOSS  IF  IT  IS  DAMAGED  OR  DESTROYED 

WHILE  ON  THE  SEA.  Like  fire  insurance,  it  is  carried  on 
almost  exclusively  by  companies  incorporated  for  the  pur- 
pose, who  issue  written  policies,  the  owner  paying  a  pre- 
mium in  proportion  to  the  amount  insured.  The  premium 
is  often  paid  by  a  series  of  notes  called  premium  notes. 
Form  27  on  page  290  gives  only  the  main  part  of  such  a 
policy. 

2.  The  Time  for  which  the  insurance  is  to  last  differs  in 


Insurance.  171 


different  cases.  Sometimes  it  is  specified,  as  for  instance 
for  a  year.  That  is  a  common  way  to  insure  vessels. 
Sometimes  it  is  for  a  particular  voyage,  no  matter  how 
long  it  may  last.  Both  vessels  and  goods  may  be  insured 
in  that  way.  A  third  way  in  which  goods  are  insured  is  to 
specify  a  time  (e.g.,  a  year),  the  policy  to  cover  all  goods 
which  the  party  may  ship  during  any  portion  of  that  time. 
Such  a  policy  is  often  called  an  open  policy,  and  it  requires 
the  greatest  good  faith.  The  shipper  must  give  notice  to 
the  company  whenever  any  goods  are  shipped,  and  the 
shipment  is  indorsed  on  the  policy  or  noted  in  the  com- 
pany's books. 

3.  The  Bisks. — In  fire  insurance  the  risk  assumed  is  of 
fire  ;  IN  MARINE  INSURANCE  THE  RISKS  ASSUMED  ARE  NOT 

ALONE  THAT  OF  FIRE,  BUT  ALSO  ALL  THE  OTHER  EXTRAOR- 
DINARY PERILS  ATTENDING  A  SEA  VOYAGE.*  Among 

others  usually  enumerated  in  the  policy  are  those  of  the 
perils  of  the  sea,  fire,  piracy,  capture,  general  average  and 
salvage. 

The  perils  of  the  sea  mean  the  risks  of  navigation,  of 
injury  from  a  violent  storm,  of  a  wreck,  of  a  collision,  etc. 
The  company  must  pay  for  loss  or  damage  so  caused.  Fire 
and  piracy  need  not  be  explained.  Capture  means  cap- 
ture by  the  ships  of  war  of  another  nation.  In  a  war  be- 
tween two  nations  all  property  belonging  to  the  citizens 
of  one  and  taken  on  the  sea  is  liable  to  capture  and  confis- 

*  On  p.  163,  we  have  seen  that  the  carrier  by  sea  is  not  responsible 
for  damage  to  the  goods  he  carries  when  it  is  caused  by  the  extraor- 
dinary perils  of  the  sea.  Now  it  is  in  general  just  those  perils  which 
marine  insurance  covers;  so  that  if  I  ship  goods  and  they  are  lost  or 
damaged  by  the  ordinary  perils  of  the  sea,  such  as  could  have  been 
provided  against,  the  carrier  is  responsible  to  me,  but  if  caused  by 
the  extraordinary  perils,  the  insurance  company  pays  me,  if  I  am 
insured. 


172  Particular  Cases. 

cation  by  the  war-ships  of  the  other.  This  is  the  risk  in- 
sured against  in  that  word.  We  have  seen  what  general 
average  is  (p.  164);  its  connection  Avith  insurance  is  as  fol- 
lows. When  there  has  been  a  general  average  loss,  no 
goods  are  really  lost  except  those  thrown  overboard,  but 
the  other  owners  must  contribute  their  share.  Each  one, 
therefore,  loses  something.  That  is  the  risk  assumed  by 
the  company  under  that  phrase.  In  the  same  way,  when 
property  is  rescued  we  have  seen  there  is  a  claim  for  sal- 
vage which  the  owner  must  pay,  though  the  property  itself 
is  not  lost.  Therefore  when  property  is  insured  against 
the  risk  of  general  average  or  salvage,  and  its  owner  has 
to  pay  a  claim  on  account  of  either  one,  the  company  must 
pay  him  what  he  has  to  pay. 

4.  Payment  of  Premium. — The  policy  is  equally  valid, 
whether  the  premium  or  the  premium  notes  are  or  are  not 

'paid  when  they  become  due,  unless  the  policy  itself  other- 
wise provides.  The  premium  is  a  debt  like  any  other  debt. 
The  premium  is  said  to  be  earned  if  the  vessel  or  the  goods 
insured  are  upon  the  sea  during  any  of  the  time  mentioned 
in  the  policy.  But  it  may  happen  that  after  a  policy  is 
issued,  it  is  decided  not  to  undertake  the  voyage,  or  not  to 
send  some  of  the  goods.  In  such  case  the  premium,  or 
that  part  of  it  corresponding  to  the  goods  not  shipped,  is 
not  earned.  It  need  not  be  paid,  or  if  paid  must  be  re- 
turned. 

5.  Ownership. — As  in  fire  insurance  the  owner  is  the  per- 
son to  be  indemnified  in  case  of  a  loss.     But  goods  are 
often  sold  after  being  insured:  in  such  case  the  new  owner 
should  ordinarily  obtain  the  consent  of  the  company,  or 
the  policy  will   be  void.     This  is  sometimes  obviated  by 
making  the  policy  "for  the  benefit  of  whom  it  may  concern 
at  the  time  of  loss."     Then  the  policy  remains  in  force 
whoever  owns  the  goods.     Sometimes  the  company  issues  a 


Insurance.  173 


certificate  with  the  policy,  which  certificate  may  be  trans- 
ferred from  one  owner  to  another,  the  policy  remaining  in 
force  all  the  time  and  being  payable  to  the  final  holder  of 
the  certificate  (form  28). 

6.  Deviation. — Where  the  property  is  insured  for  a  cer- 
tain voyage,  all  such  policies  on  the  vessel  or  cargo  are 
rendered  void  if  the  vessel  deviates  from  that  voyage,  ex- 
cept from  necessity.     To  deviate  is  to  change  the  risk  (p. 
167,  sec.  7),  and  it  makes  no  difference  whether  the  devi- 
ation increases  the  risk  or  not.    The  proper  course  for  that 
voyage  must  always  be  followed.     Thus  in  a  voyage  from 
New  York  to  Rio  Janeiro,  it  would  be  a  deviation  for  the 
vessel  to  go  to  New  Orleans  unless  the  policy  allowed  it. 
But  if  the  deviation  was  necessary,  as  to  make  repairs  or 
to  save  life,  the  policies  would  remain  in  force. 

7.  The  Amount  of  the  policy  may  be  any  fixed  by  the 
parties.     But  its  effect  is  very  different  from  the  effect  of 
the  amount  named  in  a  fire  policy,  for  it  establishes  what 
proportion  of  any  loss  the  company  shall  be  responsible  for. 

THE  AMOUNT  TO  BE  PAID  IN  MARINE  INSURANCE  IS  THAT 
PROPORTION  OF  THE  LOSS  WHICH  THE  AMOUNT  OF  THE 
POLICY  BEARS  TO  THE  VALUE  OF  THE  PROPERTY.  Conse- 
quently the  company  does  not  pay  the  whole  of  any  loss 
unless  the  amount  of  the  policy  equals  the  value  of  the 
property.  If  the  party  has  property  which  he  only  insures 
to  half  its  value,  the  company  only  pays  half  of  any  loss 
that  may  occur.  He  is  his  own  insurer  for  the  other 
half.*  (See  p.  168,  sec.  8,  for  the  rule  in  fire  insurance.) 

*  Taking  the  same  example  that  we  did  in  fire  insurance,  suppose 
the  policy  is  for  $2000  and  the  property  is  worth  $8000.  If  now 
a  loss  occurs  of  $50,  the  company  pays  two-thirds  of  it  ($33.33).  and 
the  owner  loses  the  remainder;  if  the  loss  be  $1500,  it  still  pays  two- 
thirds  ($1000);  if  the  loss  be  $3000,  i.e.,  if  the  property  is  entirely 
lost,  it  still  pays  two-thirds  of  the  loss  ($9000),  which  would  be  th* 


174  Particular  Cases. 

8.  Insurance  in  Several  Companies. — If  the  property  to 
be  insured  is  of  large  value  (e.g.,  a  vessel),  policies  are 
often  obtained  in  several  companies,  as  in  fire  insurance. 
But  there  is  not  here,  as  there  is  in  fire  insurance,  any 
difference  between  the  shares  of  any  loss  to  be  paid  by  a 
company,  when  its  policy  is  the  only  one,  and  when  there 
are  others.     In   either  case  it  pays  only  its  proportion. 
Whether  there  are  one  or  many  policies  the  amount  to  be 
paid  by  any  one  company  is  found  by  the  following  propor- 
tion: as  the  value  of  the  property  is  to  the  amount  of  its 
policy,  so  is  the  amount  of  the  loss  to  the  share  it  must  pay.* 

Note  to  TeacJier. — It  should  be  noted  that  though  the  rules  of  tire 
and  marine  insurance  are  different  as  to  the  proportion  of  any 
loss  to  be  paid,  their  results  are  the  same  when  either  the  insur- 
ance is  full  insurance,  or  the  loss  is  total.  The  difference  appears 
only  in  a  case  of  partial  loss,  where  there  was  but  partial  in- 
surance. 

9.  Value. — If  the  property  insured  is  lost  or  damaged  it 
becomes  important  to  know  its  value,  for  that  is  one  of  the 
elements  to  determine  the  amount  to  be  paid.     Sometimes 
the  place  for  the  valuation  in  the  policy  is  left  blank,  and 
in  that  case  the  value  must  be  determined  at  the  time  of 


amount  of  the  policy.  Therefore  if  one  wishes  to  free  himself  from 
all  risk  he  must  obtain  full  insurance,  i.e.,  the  amount  of  his  policy 
or  policies  must  equal  the  value  of  his  property. 

*  Takiug  again  the  same  example  as  in  fire  insurance,  if  property 
worth  $50.000  is  insured  in  one  company  for  $10,000  and  in  another 
for  $15,000,  the  first  company  will  pay  one-fifth  and  the  second  three- 
tenths  of  any  loss.  Thus  if  the  lost  be  $25, 000,  the  first  pays  $5000 
and  the  second  $7500;  if  the  loss  be  $5000,  the  first  pays  $1000, 
and  the  second  $1500.  (See  p.  169,  foot  note.) 

In  form  27  the  clauses  relating  to  prior  and  subsequent  insurance, 
and  beginning  "Provided  always,"  have  to  do  only  with  a  case 
where  the  insurance  is  more  than  the  value  of  the  property.  We  will 
no't  examine  that  subject. 


Insurance.  175 


the  loss.  But  very  often  a  value  is  inserted,  and  when  it 
is,  that  value  is  controlling  upon  both  parties.  The  policy 
is  then  called  a  valued  policy.  Thus  if  goods  are  valued  in 
a  policy  at  $500  and  half  of  them  are  lost,  the  loss  is  $250, 
no  matter  what  the  goods  were  really  worth.  The  com- 
pany pays  only  its  proper  proportion  of  $250.  An  owner 
may  use  this  method  to  determine  the  amount  of  insurance 
he  will  get.  If  in  the  above  case  the  goods  are  really  worth 
$500,  and  his  policy  is  for  $500,  he  is  fully  insured,  but  if 
they  were  worth  $1000  he  is  only  half  insured. 

10.  Misrepresentation  and  concealment  with  regard  to 
any  important  fact  make  this  contract  void,  as  they  do  all 
others.    They  are  fraud.    Thus  a  fraudulent  over- valuation 
in  a  policy  would  make  it  void. 

11.  Additional  Agreements. — In  almost  all  policies  there 
are  several  additional  agreements  or  conditions,  all  of  which 
are  binding  ;  but  it  is  impossible  to  review  them  here.    The 
important  principle  to  be  kept  in -mind  is  that  whatever 
agreement  a  person   makes,    that  is  binding  upon  him. 
Marine  insurance  is  a  business  in  which  there  are  also  many 
customs,  which  have  the  force  of  implied  agreements  and 
therefore  of  law  (p.  32). 

12.  Seaworthiness. — It  is  always  an  implied  condition 
that  the  vessel  insured,  or  on  which  the  goods  insured  are 
shipped,  shall  be  seaworthy.*     The  person  insured,  not  the 
company,  must  take  that  risk.     If  the  vessel  is  not  sea- 
worthy the  insurance  is  void,  though  both  the  company  and 
the  insured  were  ignorant  of  the  fact. 

*  Seaworthy  means  able  to  withstand  the  ordinary  dangers  of  the 
sea,  and  fully  equipped  with  all  the  things  usually  needed  on  such  a 
voyage  as  she  is  intended  to  take.  Thus  she  is  not  seaworthy  if  so 
out  of  repair  that  a  slight  gale  can  cause  her  to  spring  a  leak,  or  if 
she  is  without  the  ordinary  equipment  of  spars,  sails,  boats,  anchors, 
fuel,  charts,  nautical  instruments,  etc.,  appropriate  to  such  a  vessel, 


176  Particular  Cases. 

13.  Lost  or  not  Lost. — These  words  occurring  in  a  policy 
have  no  reference  to  the  case  where  the  property  is  insured 
before  it  goes  to  sea,  but  only  to  that  insured  while  it  is  on 
the  sea,  about  which  neither  the  owner  nor  the  company 
know  but  that  it  is  already  lost.     The  words  mean  that  the 
company  take  that  risk  also,  and  will  pay  the  insurance 
though  the  property  is  already  lost  at  the  time  the  contract 
is  made. 

14.  Abandonment. — Property  insured  may  be  wholly  lost, 
or  only  partially  lost  or  damaged.     If  wholly  lost,  the  com- 
pany pays  the  whole  amount  of  its  policy.     If  the  partial 
loss  be  less  than  half  the  value  of  the  property,  the  com- 
pany pays  its  due  proportion  of  the  amount  of  the  loss. 

But  IF  THE  LOSS  IS  PARTIAL  BUT  AMOUNTS  TO  MORE  THAN 
HALF  THE  PROPERTY  IN  VALUE,  ITS  OWNER  HAS  THE  RIGHT 
TO  GIVE  UP  TO  THE  COMPANY  WHAT  REMAINS  AND  CLAIM 
THE  FULL  AMOUNT  OF  THE  POLICY.  This  IS  Called  the 

right  of  abandonment.  The  company  cannot  refuse  to 
take  it.*  But  the  policies  sometimes  provide  that  this 
right  shall  not  exist.  They  should  then  contain  some  such 
phrase  as  this,  "without  right  of  abandonment." 

Note  to  leacher. — The  similarities  and  dissimilarities  between  cor- 
responding rules  of  fire  and  marine  insurance  should  be  noted 
all  along  It  would  not  ordinarily  be  difficult  to  obtain  blank 
forms  of  policies  in  actual  use. 

*  Thus  if  property  worth  $1000  is  insured  for  that  amount,  and  it 
is  all  lost,  the  company  must  pay  $1000;  if  one-third  of  it  is  lost,  the 
company  must  pay  $333.33;  if  it  is  damaged  so  that  what  is  left  is 
worth  only  $400,  the  owner  may  keep  it  and  claim  $600  from  the 
company,  or  he  may  give  it  up  to  the  company  and  claim  $1000. 


Insurance.  177 


CHAPTER  XXXIII. 

LIFE  INSURANCE. 

1.  The  Business  of  life  insurance  is  also  usually  carried 
on  by  companies  incorporated  for  the  purpose,  using  writ- 
ten policies.     The  risk  assumed  is  the  death  of  some  per- 
son.     LlFE  INSURANCE  IS  A  CONTRACT  TO  PAY  A  CERTAIN 
BUM  OF  MONEY   ON   THE    DEATH    OF  A  CERTAIN    PERSON  OR 

WHEN  HE  REACHES  A  CERTAIN  AGE.  The  premium  is  a 
fixed  sum  paid  by  the  person  insured  annually  or  semi- 
aimually.  The  object  of  life  insurance,  when  properly 
conducted,  is  to  give  those  who  are  dependent  upon  a  cer- 
tain person  some  means  of  support  if  he  should  suddenly 
die  (form  29,  p.  292). 

Note  to  Teacher. — Explanations  and  illustrations  might  be  given  at 
this  point  showing  how  all  insurance  is  merely  a  means  of  dis- 
tributing a  loss  among  many  which  would  otherwise  be  borne  by 
one,  or  a  few.  The  loss  to  the  world  at  large  still  remains. 

2.  The  Parties. — Here  also  the  parties  to  the  agreement 
are  two,  (1)  the  person  agreeing  to  pay  the  premium,  and 
(2)  the  company.     But  there  is  also  a  third  person  con- 
cerned, viz.,  the  one  upon  whose  death  the  money  is  to  be 
paid.     Very  often  that  person  and  the  one  who  makes  the 
contract  are  the  same,  and  he  is  then  said  to  insure  his  own 
life.     He  may  make  it  payable  to  himself,  and  if  it  is  pay- 
able at  his  death  it  then  forms  part  of  his  estate;  or  he 
may  make  it  payable  to  his  wife  or  children,  or  any  one 
else  he  chooses.     If  payable  to  another  it  cannot  be  touched 
by  his  creditors,  nor  can  he  in  his  will  deprive  the  other 
party  of  its  benefit. 

3.  The  Contract  is  not  to  indemnify,  but  to  pay  a  certain 
sum,  and  in  this  respect  differs  from  the  contract  in  fire  or 


178  Particular  Cases. 

marine  insurance.  A  person  may  insure  his  own  life  in  as 
many  companies  as  he  chooses,  and  to  any  amount  that  he 
chooses,  provided  he  is  willing  to  pay  the  premiums. 

4.  Who  May  Insure. — The  most  common  case  is  where  a 
person  insures  his  own  life.     But  the  money  may  be  made 
payable  on  the  death  of  some  other  person,  and  he  is  then 
said  to  insure  the  life  of  that  person.*     In  that  kind  of  in- 
surance ordinarily  a  person  must  have  some  pecuniary  in- 
terest in  the  life  of  the  one  on  whose  death  the  money  is  to 
be  paid,  or  the  policy  is  void.     Thus  a  wife  may  insure  the 
life  of  her  husband,  or  a  child  the  life  of  his  father,  because 
they  are  dependent  for  support  on  that  life.      So  also  a 
creditor  may  insure  the  life  of  his  debtor.     But  one  may 
not  insure  a  life  in  which  he  has  no  such  interest.     That 
would  be  only  a  wager. 

5.  Payment  of  Premium. — THE  INSURANCE  CEASES  IF 

THE   PREMIUM    IS   NOT   PAID  WHEN   DUE.      TlllS    is   SO   even 

though  it  was  accidentally  forgotten,  and  that  only  for  a 
day.  This  is  practically  very  important  where  the  policy 
has  been  running  for  several  years,  for  by  that  time,  the 
person  being  older,  the  yearly  premium  on  a  new  policy 
would  be  larger. 

6.  Assignment. — Policies  are  frequently  assigned.     Thus, 
instead  of  a  creditor's  obtaining  a  policy  on  his  debtor's  life, 
the  debtor  may  obtain  it  on  his  own  life  and  assign  it  to 
the  creditor.     IN  EVERY  ASSIGNMENT  THE  PRUDENT  RULE 
is  TO  OBTAIN  THE  COMPANY'S  CONSENT.     Sometimes  the 
policy  provides  that  it  shall  be  void  if  it  is  assigned  with- 
out consent. 

7.  Misrepresentation. — This  subject  is  of  great  import- 
ance in  life  insurance.     The  companies  before  issuing  a 


*  Though  properly  we  should  say  that  he  is  insured  against  the 
death  of  that  person. 


Interest.  179 

policy  require  a  written  application,  in  which  the  party 
must  make  answer  to  a  large  number  of  questions  with  re- 
gard to  his  health,  occupation,  etc.  Those  questions  must 
aK  be  truthfully  answered.  No  deception  can  be  practiced 
in  any  way,  or  the  policy  is  void. 


CHAPTER  XXXIV. 

INTEREST  AND   USURY. 

1.  Interest  is  MONEY   PAID   FOE  THE  USE  OF  MONEY. 
Where  one  borrows  money  of  another  promising  to  repay 
it  with  an  additional  amount,  the  sum  borrowed  is  called 
the   principal,   the    additional    amount    interest.      It   is 
usually  stated  as  so  much  per  cent,  i.e.,  so  many  dollars  of 
interest  for  every  hundred  dollars  of  principal.     All  profits 
are  not  interest.     It  must  be  a  return  for  another's  money 
lent  or  retained.     Thus  the  profits  upon  money  invested  in 
a  business,  or  dividends  on  stock,  are  not  interest.     One 
may  receive  profits  or  dividends  to  any  amount. 

2.  On  What  Allowed. — There  are  three  general  classes  of 
cases  in  which  interest  accrues:  (1)  where  it  is  expressly 
contracted  for,  (2)  many  cases  where  such  an  agreement  is 
implied,  and  (3)  where  a  debt  has  become  due  but  remains 
unpaid.     The  most  common  instance  in  the  first  class  is 
where  money  is  borrowed  by  one  of  another.     The  debtor 
usually  expressly  agrees  to  pay  the  debt  and  interest.     But 
in  many  cases  where  the  money  of  one  is  borrowed  or  de- 
tained by  another,  the  agreement  to  pay  interest  is  implied 
from  the  nature  of  the  business  or  the  usual  custom.     That 
is  the  second  class.     The  third  class  relates  to  the  interest 
accruing  after  the  debt  becomes  due,  and  it  is  a  general  rule 


180  Particular  Cases. 

that  one  who  fails  to  pay  money  due  must  also  pay  interest 
upon  it  up  to  the  time  he  does  pay. 

3.  Usury. — Many  of  the  States  forbid  any  one  to  give  or 
receive  more  than  a  certain  rate  of  interest.     This  rate 
differs  in  the  different  States,  varying  from  six  to  twelve 
per  cent.     The  taking  of  a  higher  rate  than  that  allowed 
by  the  law  is  usury;  thus  USURY  is  UNLAWFUL  INTEREST.* 

4.  Legal   Rate. — But  every  State  establishes  a  certain 
rate  which  shall  be  the  rate  of  interest  in  all  those  cases 
where  the  parties  have  not  fixed  their  own  rate.     This  is 
called  the  legal  rate,  and  in  most  of  the  States  it  is  six  per 
cent  per  annum.     Thus,  a  promise  to   "pay  $100  and  in- 
terest" means  interest  at  the  legal  rate   of  the  State  in 
which  the  payment  is  to  be  made.    The  legal  rate  very  often, 
but  not  always,  is  the  same  as  the  rate  mentioned  in  the 
preceding  section,  i.e.,  the  highest  rate  of  lawful  interest. 

5.  Effect  of  Usury. — Some  penalty  is  inflicted  upon  the 
one  who  takes  usury,  i.e.,  upon  the  lender,  not  upon  the  bor- 
rower.     This  penalty  varies  greatly  in  the  different  States, 
but  generally  it  is  one  of  these  three  kinds:  (1)  the  forfeit- 
ure of  the  usurious  interest,  i.e.,  all  above  the  lawful  rate; 
(2)  the  forfeiture  of  all  the  interest;  or  (3)  the  forfeiture 
of  both  principal  and  interest.     Thus,  in  a  State  where  the 
first  rule  is  adopted,  the  lender  who  has  lent  at  a  usurious 
rate  may  recover  the  principal  and  interest  at  the  legal  rate ; 
where  the  second  is  adopted,  only  the  money  he  lent ;  and 
where  the  third  is  adopted,  not  even  that  (p.  24,  sec.  3). 

*It  is  thought  by  many  that  usury  laws  are  necessary  for  the 
reason  that  if  there  were  none  the  lenders  (i.e.,  the  rich)  would 
oppress  the  borrowers  (i,e  ,  the  poor)  by  charging  exorbitant  rates. 
But,  on  the  other  hand,  the  opinion  has  of  late  grown  that  this  is  a 
mistaken  policy,  and  that  it  would  be  better  for  the  community  at 
large  to  allow  parties  to  make  sucli  contracts  as  they  choose.  Con- 
sequently a  few  States,  doing  that,  have  no  usury  laws. 


Pledges.  181 


CHAPTER  XXXV. 

PLEDGING   OF   PROPERTY. 

1.  Security. — A  creditor  is  said  to  have  security  for  his 
claim  or  debt  when  he  has  something  to  rely  upon  besides 
the  mere  promise  of  the  debtor.     That  security  may  be  the 
guaranty  of  some  third  person,  as,  for  instance,  when  some 
one  beside  the  maker  indorses  a  note.     It  may  also  be  some 
particular  property  of  the  debtor  appropriated  to  secure  that 
particular  debt.     If  it  is  real  property  it  is  done  by  way 
of  mortgage  (p.  225) ;  if  personal  property,  by  way  of  pledge. 

2.  A  Pledge  is  therefore  security  for  the  payment  of  a 
debt.     We  may  define  it  thus:    A  PLEDGE  is  AN  AGREE- 
MENT   BETWEEN     A    DEBTOR    AND    CREDITOR    BY     WHICH 
THE     FORMER     GIVES     THE     LATTER     CERTAIN      PERSONAL 
PROPERTY   AS   SECURITY    FOR  THE    DEBT.       The  Word  pawn 

means  nearly  the  same  thing,  and  both  words  are 
often  used  to  mean  the  property  pledged,  as  well  as  the 
agreement.  Thus  we  see  a  pledge  is  a  contract.  These 
three  elements  are  essential  to  it:  (1)  a  debt,  (2)  an  actual 
delivery  to  the  creditor  of  the  property  pledged,  and  (3) 
an  agreement  that  it  shall  stand  as  security. 

3.  Collateral. — The  words  collateral  or  collateral  security 
are  often  used  in  the  sense  of  pledge.  Thus,  when  banks  loan 
money  they  often  require  security,  and  government  bonds, 
the  stock  and  bonds  of  railroads,  etc.,  are  often  used  as 
pledges  for  the  debt,  and  are  then  called  collateral.     The 
bank  is  said  to  loan  on  collateral. 

4.  Creditor's  Rights. — THE    CREDITOR   MAY  KEEP  THE 

PROPERTY  PLEDGED  TO  HIM  UNTIL  THE  DEBT  IS  PAID, 
OR  IF  NOT  PAID  WHEN  DUE  HE  MAY  SELL  THE  PROPERTY. 

Thus  he  has  two  rights,  the  right  to  keep  (i.e.,  a  lien)  and 


182  Particular  Cases. 

a  right  to  sell,  but  the  latter  does  not  arise  until  the  debt 
is  due.  If  it  is  sold  the  creditor  then  may  deduct  from  the 
proceeds  the  amount  of  his  debt,  giving  the  surplus,  if  there 
is  any,  to  the  debtor.  If  it  does  not  sell  for  enough  to  pay 
the  debt,  the  creditor  has  his  claim  for  the  balance  against 
the  debtor. 

5.  Demand  and  Notice. — But  before  the  pledge  can  be 
sold  a  demand  for  the  payment  of  the  debt  must  be  made 
upon  the  debtor,  and  notice  must  be  given  him  of  the  time 
and  place  of  sale.     But  often  the  parties  originally  agree 
that  no  notice  need  be  given  to  the  debtor,  and  in  such 
case  it  need  not. 

6.  Debtor's  Eight. — Until  it  is   sold  the  property  be- 
longs to  the  debtor,  the  creditor  simply  having  the  right 
to  hold  it  in  his  own  possession.     When  the  debt  is  paid 
the  creditor  loses  all  right,  and  the  property  is  then  said  to 
be  redeemed.     THE   DEBTOK    MAY  AT  ANY  TIME  BEFORE 

IT  IS  SOLD  REDEEM  HIS  PROPERTY  BY  PAYING  THE 
DEBT. 

7.  Negotiable  Paper,  like  other  personal  property,  may 
be  pledged.     The  two  parlies  will  themselves  know  that  the 
transaction  is  only  a  pledge,  and  that  the  creditor  is  not 
the  owner.     Consequently  the  rights  of  the  parties  as  to 
each  other  are  governed  by  the  principles  of  this  chapter. 
But  to  others  the  creditor  may  appear  to  be  the  owner  of 
the  property.     Therefore,  if  he  should  act  as  owner,  as  by 
pretending  that  he  had  the  right  to  sell  when  he  had  not, 
the  rights  of  those  others  would  be  governed  by  the  law 
concerning  negotiable  paper  (pp.  107-117). 

8.  Pawnbrokers  are  those  who  make  it  a  business  to  loan 
money  (generally  in  small  sums)  on  pledges  of  articles  of 
personal  value,  such  as  clothing,  jewelry,  musical  instru- 
ments, etc.     They  are  not  brokers  in  the  sense  in  which 
the  word  is  used  in  Chapter  XXI.,  for  they  act  for  them- 


Ba/riking,  183 

selves.  Their  rights  and  duties  are  those  of  parties  with 
whom  property  is  pledged.  They  are  often  allowed  by  law 
to  charge  more  than  the  ordinary  rate  of  interest  for  the 
money  they  loan. 

9.  Chattel  Mortgages.* — Property  cannot  be  pledged 
without  being  delivered  into  the  possession  of  the  creditor. 
Yet  a  person  will  often  desire  to  use  his  personal  property 
as  security  and  yet  retain  it  in  his  possession,  as,  for  in- 
stance, if  it  is  a  stock  of  goods  from  which  he  is  selling. 
This  may  be  done  by  his  giving  a  chattel  mortgage  (form 
34),  which  must  be  filed  in  a  certain  public  office.  A 
chattel  mortgage  is  like  a  pledge  in  that  the  debtor  may 
become  entitled  to  the  property  by  paying  the  debt:  they 
are  unlike  in  that  in  a  chattel  mortgage,  if  the  debt  is  not 
paid,  the  property  becomes  the  creditor's,  and  the  debtor  is 
not  entitled  to  any  surplus.  A  chattel  mortgage  is  a  con- 
ditional sale  of  the  property  to  the  creditor,  the  property 
becoming  the  creditor's  if  the  debt  is  not  paid.  (See  p.  87, 
sec.  3.)  A  pledge  is  not  a  sale  to  the  creditor,  but  only 
gives  him  the  right  to  sell  the  property  to  some  one  else  if 
the  debt  is  not  paid. 


CHAPTER   XXXVI. 

BANKING. 

1.  In  General. — Banking  as  a  business,  is  dealing  in 
money.  It  consists  mainly  of  two  branches,  (1)  the  re- 
ceiving of  money  on  deposit,  and  (2)  the  loaning  of  money 
at  interest.  Thus  A,  B,  and  C  deposit  some  money  with 
the  bank;  the  bank  takes  that  money  and  lends  it  to  D  and 

*A  chattel  means  a  piece  of  personal  property. 


184  Particular  Cases. 

E.  It  pays  no  interest  (or  a  low  rate)  to  A,  B,  and  C,  but 
charges  D  and  E  interest.  There  are  therefore  two  classes 
of  people  with  whom  the  bank  has  dealings,  (1)  those  who 
deposit  their  money  with  the  bank  (called  depositors),  and 
(2)  those  who  borrow  from  the  bank.  Banking  is  often 
carried  on  by  individuals  or  firms,  but  most  extensively  by 
banking  corporations.* 

2.  Deposits. — A  deposit  is   substantially  a  loan   to  the 
bank.     The  depositor  may  withdraw  his  money  or  any  part 
of  it  at  any  time  he  chooses.     The  act  of  opening  an  ac- 
count with  a  bank  makes  a  contract.     On  the  part  of  the 
depositor,  this  contract  is  that  the  bank  may  use  as  its  own 
whatever  money  he  deposits  with  it;  on  the  part  of  the 
bank,  the  contract  is  that  it  will  pay  back  to  him  the 
money  or  any  part  of  it  whenever  he  calls  for  it.     He  calls 
for  parts  of  it  from  time  to  time  by  means  of  checks  (p.  126). 

3.  Discounts. — One  way  in   which  a  large  part   of  the 
lending  of  a  bank  is  done  is  by  discounting   commercial 
paper.     Its  depositors,  or  others  dealing  with  it,  often  ob- 
tain notes  or  drafts  not  yet  due,  but  upon  which  they  wish 
to  obtain  the  money  immediately.     If,  believing  them  to 
be  certain  of  payment,  the  bank  is  willing  to  buy  them,  it 
does  so  and  the  notes  and  drafts  are  transferred  to  it,  and 
it  pays  for  them,  deducting  a  certain  interest.     Thus  a 
discount  is  in  reality  a  sale,  the  property  sold  being  the 
note  or  draft.     But  its  effect  is  that  of  a  loan,  with  the  in- 
terest paid  in  advance,  f 

Note  to  Teacher ,— The  foot-note  gives  an  example  in  which  the 
transaction  is  in  the  nature  of  a  loan.  If  the  bank  should  take 
the  note  without  the  indorsement  of  the  other  party,  or  should 
buy  it  in  the  market,  it  would  be  more  in  the  nature  of  a  sale. 

*  As  the  word  bank  will  be  used  here,  it  will  include  bankers, 
f  Suppose  A  has  B's  note  for  $500  due  in  six  months.     If  he 
wishes  the  money  immediately  he  applies  to  the  bank  to  discount  it. 


Hotel  Keepers.  185 


4.  Other  Business. — Banks  loan  money  in  other  ways 
besides  by  discounting  paper.  Nor  is  the  lending  of  money 
the  only  business  done.  They  are  allowed  to  pay  out  and 
use  as  money  bank  bills,  which  we  have  seen  are  really  their 
promissory  notes  (p.  145).  They  also  buy  and  sell  gold, 
stocks,  bonds,  etc.,  or  receive  valuable  articles  into  their 
vaults  for  safe-keeping.  But  we  need  not  consider  these 
things,  for  the  laws  governing  their  transactions  are  not 
peculiar,  but  are  the  ordinary  rules  of  sales,  commercial 
paper,  pledge,  etc. 


CHAPTER  XXXVII. 

HOTEL   KEEPERS. 

1.  Definition. — A  hotel  keeper  *  is  one  engaged  in  the 
business  of  supplying  board  and  lodging  to  travelers.  It 
is  essential  that  we  should  know  just  what  constitutes  one 
a  hotel  keeper,  for  his  rights  and  his  duties  are  peculiar  in 
some  respects.  As  we  shall  see  in  the  following  sections, 
he  has  greater  obligations,  especially  with  regard  to  the 
property  of  his  guests,  and  more  extensive  rights,  than  a 
person  ordinarily  has  who  has  the  property  of  another  in 

The  bank  takes  it,  with  his  indorsement,  and  pays  him  (say)  $485, 
i.e.,  $500  less  six  months'  interest.  Thus  A  gets  his  money  six 
months  sooner  than  he  would  have  if  he  had  kept  the  note;  and 
the  bank  (when  B  pays  the  note)  gets  $500,  which  is  all  it  paid  and 
interest.  Another  way  to  make  the  loan  is,  for  A  to  make  his  own 
note,  and  have  the  bank  discount  that. 

"Innkeeper,"  or  "tavern-keeper,"  means  the  same  as  "hotel 
keeper,"  and  a  hotel,  tavern,  or  inn  is  a  house  where  any  one  may 
obtain  food  or  lodging.  The  term  public-house  expresses  the  idea 
well 


186  Particular  Cases. 

his  possession.  The  constituting  elements  are  three:  (1) 
his  following  it  as  a  business,  (2)  his  offering  his  services 
to  the  public  generally,  and  (3)  his  providing  both  food 
and  lodging,  (p.  159).  Thus  one  who  received  private 
guests  in  his  own  private  house,  or  one  who  even  received 
strangers  now  and  then  for  a  compensation  (but  not  as  a 
business),  would  not  bear  towards  them  the  responsibility 
of  a  hotel  keeper  to  his  guests.  Neither  would  one  who 
kept  only  a  restaurant,  even  though  it  was  open  to  all  the 
public. 

2.  Obligation  to  Receive. — The  rights  and  duties  of  hotel 
keepers  are  in  some  respects  similar  to  the  rights  and  duties 
of  common  carriers.    One  similarity  is  this:  they  offer  their 
services  to  the  public,  and  they  must  render  them  to  whoever 
chooses  to  accept  of  them.     A  hotel  keeper  on  being  paid 
a  reasonable  compensation  is  obliged  by  law  to  receive  any 
one  who  comes  to  his  house  until  the  house  is  full.     He, 
therefore,  is  an  exception  in  this  particular,  to  the  rule  al- 
lowing one  to  contract  with  whom  he  pleases  (p.  18).     But 
intoxicated  or  disorderly  persons  he  need  not  receive,  and 
if  they  are   there  he  may  require  them  to  leave.     The 
amount  of  compensation  is  not  regulated  by  law,  but  left 
to  agreement  between  the  parties. 

3.  Lien. — A  hotel  keeper  may  detain  the  property  of  a 
guest  placed  in  his  care  until  the  charges  against  the  guest 
are  paid.     This  lien  is  like  the  lien  of  a  common  carrier 
(p.  161).     Thus  the  trunks  of  a  traveler,  or  his  horse  which 
has  been  stabled  at  the  inn,  may  be  detained  until  he  pays 
his  bill.     If  one  is  traveling  with  a  family  or  servants,  this 
will  include  the  board  and  lodging  of  all. 

4.  Loss  of  Property. — If  the  property  of  a  guest  is  lost 
while  he  is  at  a  hotel,  the  hotel  keeper  is  responsible  for 
it,  unless  it  were  lost  through  the  fault  or  carelessness  of 
the  owner  himself  or  of  those  with  him.     As  in  the  case  of 


Hotel  Keepers.  187 


the  common  carrier,  it  makes  no  difference  whether  or  not 
the  hotel  keeper  exercised  due  care.  Thus  if  other  guests 
or  burglars  from  outside  should  steal  it,  or  if  it  should 
be  destroyed  by  fire  in  spite  of  every  precaution  upon  the 
hotel  keeper's  part,  yet  he  would  still  be  responsible  for  it. 

But  the  guest  must  place  the  property  where  he  is  re- 
quested to,  in  order  that  the  proprietor  may  have  the 
opportunity  to  protect  it,  or  else  he  must  take  all  the  risk 
himself.  Very  often  in  large  hotels  safes  are  provided,  in 
which  the  guests  are  requested  to  place  their  money,  jewelry 
and  other  valuable  property.  If  they  neglect  to  do  so  and 
in  consequence  the  property  is  lost,  the  hotel  keeper  is  not 
responsible. 

5.  Boarding-Houses. — A  boarding-house  is  different  from 
a  hotel  in  two  particulars:  (1)  it  is  not  intended  for  tran- 
sient guests,  but  for  permanent  boarders,  and  (2)  it  is  not 
open  to  the  public.  Those  and  only  those  are  received 
there  whom  the  proprietor  chooses  to  accept.  The  peculiar 
rights  and  duties  of  a  hotel  keeper  do  not  pertain  to  one 
who  keeps  a  boarding-house.  The  latter  is  under  no  obli- 
gation to  receive  any  one  who  applies  for  board;  he  has  no 
lien  upon  a  boarder's  property;  and  he  is  not  responsible 
for  the  loss  of  that  property  unless  such  loss  has  been 
caused  by  his  negligence.  The  same  person  may  be  a  hotel 
keeper  to  some  and  a  boarding-house  keeper  to  others. 
Thus  if  one  lives  at  a  hotel  for  some  time  under  an  ar- 
rangement agreed  upon  beforehand,  as  to  him  the  proprie- 
tor is  not  a  hotel  keeper. 


188  Particular  Cases. 


HENS. 

Those  having  the  right 

to  retain  others'  property  How  long 

•which  is  in  their  hands.  it  lasts. 

L  A  SELLER  of  goods, Until  price  is  paid. 

(unless  selling  on  credit).  (p.  93). 


II.  A  COMMISSION  MERCHANT  ; 

1.  As  to  the  buyer  he  is  a  seller See  I. 

2.  As  to  his  principal, 

He  may  keep  any  of  the  latter's 

goods  in  his  hands Until    all    commissions, 

advances,  and  expenses 
due  are  paid  (p.  98). 

III.  One   who  holds  property, 

to  render  PERSONAL  SERVICES 

in  connection  with  it, . .  .Until  his  charges  are  paid, 
as  to  repair  it,  keep  it  (p.  157). 

on  storage,  etc. 

IV.  A  COMMON  CARRIER Until  the  freight  is  paid. 

(p.  161). 

V.  A  person  holding  it 

as  a  FLEDGE . .  .Until  the  debt  is  paid. 

(p.  181). 

VI.  A  HOTEL  KEEPER .......  Until  his  charges  are  paid. 

(p.  186). 

^This  list  does  not  include  all  the  liens  there  are,  but  only  some  of 
the  more  important  ones.] 


Telegraphs.  189 


CHAPTEK  XXXVIII. 

TELEGRAPHS. 

1.  Parties  to  the  Contract. — The  business  of  telegraphy 
is  carried  on  by  corporations,  and  like  other  business  con- 
sists of  the  making  and  performing  of  a  system  of  contracts. 
The  parties  to  this  contract  are  two,  (1)  the  sender  of  the 
message,  and  (2)  the  telegraph  company.     Each  of  these 
two  parties  agrees  to  do  certain  things,  and  each  must  keep 
his  (or  its)  agreement.     Consequently  if  the  company  fails 
to  do  what  it  agreed,  the  sender  can  compel  it  to  pay  for 
any  loss  resulting.      But  there  is  no  contract  ordinarily 
between  the  company  and  the  one  to  whom  the  message 
(called  a  dispatch]  is  sent,  and  consequently  it  is  not  re- 
sponsible for  any  loss  he  may  suffer.* 

2.  The  Contract. — To  ascertain,  therefore,  the  duties  of 
the  two  parties  to  the  contract  we  have  simply  to  inquire, 
What  did  they  agree?     The  ordinary  telegraph  blank  some- 
times constitutes  that  contract.     The  sender  says  to  the 
company,  "Send  this  message,"  i.e.,  he  requests  it  to  do 
so,  and  such  a  request  is  in  effect  an  offer  to  pay  for  the 
service  if  it  is  done.     The  company  by  taking  the  message 
agrees  to  send  it,  i.e.,  accepts  the  offer.     The  request  and 
compliance,  or  as  we  may  say,  the  offer  and  acceptance, 
make  the  contract.     This  is  an  agreement  for  personal 
services  (Chap.  XXVIII. ),  and  the  company  is  as  it  were  a 
special  messenger. 

3.  Its  Terms. — The  main  parts  of  this  contract  are  these: 
(1)  the  sender  agrees  to  pay  for  the  message  at  the  regular 

*  Thus,  suppose  A  sends  a  telegram  to  B,  but  through  the  fault 
of  the  company  in  not  sending  it  promptly  both  A  and  B  suffer  loss. 
A  can  compel  the  company  to  pay  him,  but  B  cannot 


190  Particular  Cases. 

rate,  and  the  company  may  refuse  to  take  it  unless  he  pays 
in  advance;  (2)  the  company  agrees  to  send  the  message  by 
telegraph  with  promptness,  deliver  it  to  the  person  addressed, 
and  not  to  reveal  its  contents  to  any  one  else.  But  the 
liability  of  the  company  for  mistakes  is  often  limited  by 
its  blanks,  the  blank  being  drawn  in  such  a  way  that  it  is  a 
contract. 

4.  Accuracy. — The  message  must  be  sent  as  it  is  given. 
Hence  the  operator  cannot  correct  evident  mistakes,  such 
as  mistakes  of  grammar,  nor  add,  nor  omit  anything,  nor 
make  any  change  in  it. 

5.  Promptness. — The  message  must  be  sent  as  soon  as  it 
can  be,  and  different  messages  must  be  sent  in  the  order  in 
which  they  are  received.     Even  an  hour's  unnecessary  delay 
might  make  the  company  responsible. 

6.  Secrecy. — A  telegraph  company  is  a  confidential  mes- 
senger.    It  has  no  right  to  reveal  the  message  to  any  one, 
except  the  one  to  whom  it  is  addressed. 


CHAPTER  XXXIX. 

PATENTS. 

1.  A  Patent  is  a  written  instrument  issued  by  the  Na- 
tional Government,  securing  to  an  inventor  the  exclusive 
right  to  his  invention  within  the  United  States.*  Every 
one  always  has  the  right  to  make,  or  use,  or  sell  anything  he 
invents.  That  right  does  not  need  a  patent.  But  without 
a  patent  any  one  else  can  also  make  it.  A  patent  secures 

*  The  word  is  also  used  to  mean  a  deed  of  lands  granted  by  the 
Government,  but  in  this  book  we  speak  of  patents  for  inventions 
only. 


Patents.  191 

to  him  the  exclusive  right,  or  in  other  words,  the  right  to 
keep  all  others  from  making,  using,  or  selling  the  thing. 
It  does  not,  therefore,  grant  the  inventor  any  new  right; 
it  simply  takes  away  that  right  from  every  one  but  him. 
A  patent  lasts  for  seventeen  years,  and  after  that  any  one 
may  make,  use,  or  sell  the  thing  patented. 

2.  Its  Object  is  to  encourage  inventors  and  increase  their 
number,  by  greatly  increasing  the  profit  to  be  made  if  the 
invention  is  successful.     Without  the  exclusive  right  an 
inventor  might  make  nothing  out  of  his  invention.     The 
more  useful  it  was  the  more  eager  others  would  be  to  make, 
use,  or  sell  it,  and  thus  he  would  not  only  be  deprived  of 
a  large  portion  of  the  market,  but  he  Avould  be  exposed  to 
competition  which  would  greatly  lessen,  if  not  take  away, 
his  profits.     But  with  the  exclusive  right  the  inventor  not 
only  has  the  whole  field  but  also  can  fix  his  own  prices. 

3.  How  Obtained. — To  obtain  a  patent  an  application 
must  be  made  to  the  Commissioner  of  Patents,  accom- 
panied by  carefully  prepared  papers  and  drawings  describ- 
ing the  invention.     The  government  officers  then  make  an 
examination  to  see  if  the  case  is  a  proper  one  for  a  patent, 
and  if  it  is  the  patent  (also  called  letters  patent]  is  signed 
and  sent  to  the  inventor.     Foreigners  may  obtain  patents 
here. 

4.  What  may  be  Patented. — Almost    anything  may  be 
patented,  provided  it  is  a  new  invention,  and  is  suited  to 
some  useful  purpose.      The   inventor  must  be  the  very 
first  one  who  has  ever  known  of  it.      Patents  are  very 
often  granted  for  complete  machines,  which  are  entirely 
new,  involving  some  wholly  new  principle,*  or  for  a  manu- 
factured article  itself,  the  article  being  entirely  new  in  its 


*  For  example,  the  Morse  patents   for  the  electric  telegraph,  or 
the  Howe  patent  for  the  sewing  machine. 


192  Particular  Cases. 

nature.*  But  the  great  majority  of  inventions  are  for 
some  small  improvement  upon  an  old  machine  or  process. 
In  such  case  the  inventor  gets  his  patent,  not  for  the  new 
machine  he  makes,  but  only  for  his  improvement.  Thus, 
if  A  invents  a  steam  engine,  and  B  afterwards  invents  an 
improved  valve  to  go  with  it,  B  cannot  make,  use,  or  sell 
the  engine  without  A's  consent,  nor  can  A  make,  use,  or 
sell  the  valve  without  B's  consent. 

5.  The  Sale  of  a  Patented  Article  by  the  inventor  car- 
ries with  it  the  right  to  use,  to  repair,  and  to  sell  that  par- 
ticular article  until  it  is  worn  out,  but  not  to  make  another 
like  it.     The  patented  article,  once  sold  by  the  inventor, 
goes  into  the  world's  stock  in  trade,  and  may  be  sold  and 
resold  indefinitely. 

6.  The  Sale  of  the  Patent  is  a  different  thing,  and  means 
the  transfer  of  the  exclusive  right,  or  some  portion  of  it. 
Thus  if  I  buy  a  newly-patented  pen,  I  may  use,  or  repair, 
or  sell  that  one  pen  anywhere;  if  I  purchase  the  patent,  I 
may  make,  use,  or  sell  any  number  of  these  pens.     Inven- 
tors often  sell  the  exclusive  right  in  certain  portions  of  the 
territory,  as  by  granting  to  one  the  exclusive  right  to  make, 
use,  and  sell  the  invented  article  in  the  Eastern  States,  to 
another  the  same  right  in  the  Pacific  States,  etc. 

7.  Infringement  is  the  making,  using  or  selling  the  pat- 
ented article  without  the  permission  of  the  owner  of  the 
patent.     Its  consequences  are  twofold:    (1)  the  inf ringer 
must  pay  to  the  owner  of  the  patent  whatever  damages  the 
latter  suffers  through  the  infringement,  equivalent  usually 
to  the  profits  which  the  inf  ringer  has  made;  (2)  the  court 
will  compel  the  inf  ringer  to  stop.     These  are  the  two  meth- 
ods by  which  the  exclusive  right  is  enforced  (sec.  1). 

*  For  example,  the  Goodyear  patents  for  vulcanized  rubber,  or 
some  patents  for  patent  medicines. 


Copyrights.  193 


8.  Validity  of  Patent. — Patents  are  not  necessarily  valid 
because  granted.     We  may  never  certainly  know  whether 
a  patent  is  valid  until  some  court  has  decided  it  to  be  so. 
Thus,  it  may  be  for  an  invention  that  was  not  really  new, 
though  thought  to  be  at  the  time;  or,  the  papers  may  be 
drawn  incorrectly.     In  any  such  case  it  is  altogether  void. 
If,  when  one  is  sued  for  infringement,  he  can  prove  that 
the  supposed  inventor  was  not  really  the  first  inventor,  the 
patent  is  declared  void,  and  every  one  may  disregard  it. 

9.  Mark. — Every  patented  article,  before  it  is  sold,  must 
be  marked  patented,  so  as  to  give  notice  to  every  one  that 
it  is  patented. 


CHAPTEE  XL. 

COPYRIGHTS. 

1.  A  Copyright  is  the  exclusive  right  to  print  and  sell 
what  one  has  written  or  drawn;  or,  in  other  words,  the  ex- 
clusive right  to  make  copies.     This  means,  as  we  have  seen 
with  patents,  not  the  right  to  make  copies,  but  the  right  to 
keep  all  others  from  doing  so.     Thus  a  copyright  is  the 
same  as  a  patent  right  applied  to  articles  which  may  be 
printed.     This  right  is  granted  to  authors  by  the  National 
Government  upon  proper  application,  and  continues  for 
twenty-eight  years,   with  the  privilege  of  fourteen  years 
longer  if  it  is  then  desired. 

2.  Its  Object  is  to  encourage  the  writing  of  books,  by 
securing  to  the  author  the  sole  profit.     Patents  and  copy- 
rights increase  inventions  and  books.     The  general  purpose 
of  both,  therefore,  is  the  improvement  of  the  knowledge 
and  condition  of  mankind. 

3.  How  Obtained. — A  copyright  for  a  book  is  obtained 
by  simply  sending  to  the  Librarian  of   Congress  a  copy 


194  Particular  Cases. 

of  the  title  page  of  the  book  before  it  has  been  published, 
and  two  copies  of  the  complete  book  when  it  is  published. 
No  examination  is  made,  as  in  the  case  of  patents. 

4.  What  may  be  Copyrighted. — Books  are  the  most  fre- 
quent subjects  of  copyright,  but  maps,  charts,  engravings, 
musical  compositions,  etc.,  may  be  protected  in  the  same 
way. 

5.  Sale. — The  sale  of  the  copyrighted  book  carries  with  it 
the  right  to  use  and  to  sell  that  particular  book  forever. 
The  copyright  may  also  be  sold,  and  that  carries  with  it  the 
right  to  publish  and  sell  any  number  of  copies  of  the  book. 

6.  Infringement  is  the  making  or  selling  of  the  copy- 
righted article  without  the  permission  of  the  owner  of  the 
copyright.     Its  consequences  are  substantially  the  same  as 
in  the  case  of  patents   (p.   192),  viz.,  the  liability  to  be 
sued  for  damages  by  the  owner  of  the  copyright,  and  to  be 
ordered  by  the  court  to  cease  printing  the  article. 

7.  Foreign  Works. — The  books  of  authors  not  residing 
in  this  country  cannot  be  copyrighted  here.     Thus  any  one 
may  publish  or  sell  here  the  work  of  an  English  author 
without  his  permission. 

8.  Mark. — Each   copyrighted  article   must  be    marked 
"copyright,"  so  that  all  people  may  have  notice  that  it  is 
copyrighted.     In  a  book  this  must  be  printed  upon  the 
title  page  or  the  page  following. 


CHAPTER  XLI. 

TRADE-MAKES. 


1.  A  Trade-Mark  is  a  device  or  name  used  by  a  merchant 
or  manufacturer  as  a  symbol  to  denote  his  own  goods.  It 
is  usually  attached  to  them.  It  may  be  a  peculiar  or  man- 


Trade-Marks.  195 


ufactured  word,  such  as  "Cocoaine,"  or  "Vegetable  Pain- 
killer," or  it  may  be  any  sort  of  picture  or  design. 

2.  The  Right  Acquired  in  a  trade-mark  is  tlie  exclusive 
right  to  use  it,  or,  in  other  words,  the  right  to  keep  others 
from  using  that  trade-mark.     It  may  be  acquired  by  a 
citizen  or  a  foreigner,  and  lasts  as  long  as  the  trade-mark 
is  used. 

3.  Its  Object  is  to  protect  both  the  owner  and  the  public 
against  imitations  of  an  article  which  has  acquired  a  good 
reputation.      "Were  it  not  for  the  exclusive  right  others 
might  piit  on  their  goods  the  same  mark,  and  thus  deceive 
the  public  into  believing  they  were  manufactured  by  the 
same  persons.     This  might  deprive  the  one  who  had  built 
up  the  trade  of  the  results  of  his  industry  or  skill,  or  it 
might  defraud  the  public  into  buying  an  inferior  article. 

4.  How  Acquired. — The  exclusive  right  to  use  a  trade- 
mark   is   acquired   simply  by  its  adoption  and  use.     No 
application  is  made  to  either  the  State  or  National  Govern- 
ment.    In  1881  Congress  passed  a  law  which  gives  addi- 
tional protection  to  trade-marks  used  in  foreign  commerce, 
provided  they  are  registered  in  the  Patent  Office.     But  for 
ordinary  trade-marks  used  only  in  this  country,  no  regis- 
tration in  any  public  office  is  ordinarily  necessary.* 

5.  Infringement  of  a  trade-mark  is  prevented  in  sub- 
stantially the  same  way  as  in  the  case  of  patents  (p.  192), 
viz.,  by  a  suit  against  the  in f ringer  for  damages,  and  for 
an  injunction  to  compel  him  to  cease  using  it. 

*  The  law  of  Congress  of  1870,  which  was  much  broader  than  the 
law  of  1881,  and  which  purported  to  require  registration  in  all  cases, 
has  been  decided  to  be  unconstitutional  and  void. 


196  Particular  Cases. 


I.  PATEKTS 

I.  Are  FOE  new  INVENTIONS ; 
II.  Are  GE ANTED  by  the  National  Government, 

1.  After  au  examination,  and 

2.  To  citizens  or  foreigners; 

III.  SECTJEE  the  exclusive  right  to 

(1)  Make,  (2)  use,  and  (3)  sell  the  patented  article; 

IV.  CONTINTTE  for  17  years. 

II.  COPYRIGHTS 

I.  Are  FOE  new  BOOKS,  maps,  engravings,  etc. ; 
II.  Are  GEANTED  by  the  National  Government, 

1.  Without  any  examination,  and 

2.  To  a  citizen  or  resident  of  the  U.  S.  only; 

III.  SECTJEE  the  exclusive  right  to 

(1)  Print,  (2)  publish,  and  .(3)  sett  copies  of  the  copy- 
righted article ; 

IV.  CONTINUE  for  28  years,  with  a  right  to  14  years 

more. 


III.  TRADE-MARKS 

I.  May  be  attached  to  ANYTHING  one  makes  or  sells; 
II.  Are  ACQUIEED, 

1.  By  use  simply,  and 

2.  By  a  citizen  or  foreigner; 

III.  SECUEE  the  exclusive  right  to  use  them,  and 

IV.  CONTINUE  as  long  as  used. 


Bankruptcy.  197 


CHAPTEE  XLII. 

BANKRUPTCY. 

1.  Bankruptcy  is,  in  a  general  sense,  the  same  as  insol- 
vency, and  a  bankrupt  or  insolvent  is  one  who  is  unable  to 
pay  his  debts  as  they  become  due.     A  person  in  commercial 
life  who  finds  himself  unable  to  pay  his  debts,  usually  has  a 
number  of  creditors,  and  also  has  some  property  remaining. 
There  is  in  nearly  every  State  a  system  of  law,  called  the 
bankrupt  law,  insolvent  law,  or  assignment  law,  which  has 
one  or  both  of  these  objects;  (1)  to  distribute  the  remain- 
ing property  of  the  bankrupt  among  his  creditors,  and  (2) 
to  release  him  from  his  debts,  so  that  he  may  have  oppor- 
tunity and  incentive  to  devote  himself  to  business  again. 

2.  National    Law.— From   1867   to   1878    there  was    a 
national  bankrupt  act,  operating  the  same  in  every  State; 
but  that  has  been   repealed  and  now  (1882)  each  State 
regulates  the  matter  as  it  chooses,  the  systems  being  quite 
different  in  some  respects. 

3.  General  Assignment. — A  debtor  may  pay  first  any 
creditor  he   chooses,   even   if  after  so  doing  he  has  not 
enough  property  left  to  pay  the  rest.     If  he  desires  to  pay 
all  the  creditors  a  portion  instead  of  leaving  some  unpaid, 
that  is  often  done  by  means  of  a  general  assignment,  which 
is  a  paper  signed  by  the  debtor,  in  which  he  assigns  or 
transfers  all  his   property  to  some   one  else,  called   the 
assignee  or  trustee,  to  distribute  it  among  the  creditors 
(form  30).     After  the  assignment  the  sheriff  cannot  levy 
upon  the  property,  nor  has  the  debtor  any  control  over  it. 

Note  to  Teacher. — It  may  be  asked  why  the  debtor  himself  cannot 
sell  his  own  property,  and  distribute  the  proceeds  equally.  For 
this  reason:  Any  creditor  may  sue,  and  on  obtaining  judgment 


198  Particular  Cases. 

have  the  sheriff  seize  any  of  the  property  and  satisfy  his  own 
claim  fully  out  of  it,  without  regard  to  any  other  creditor. 
Thus,  it  is  a  race  between  creditors.  An  assignment  stops  this. 

4.  The  Assignee's  Duties  are  (1)  to  notify  all  the  cred- 
itors to  present  their  claims  to  him,  (2)  to  sell  all  the  prop- 
erty of  the  debtor  and  convert  it  into  cash,  and  (3)  to 
distribute  all  the  money  thus  obtained  among  all  the  cred- 
itors in  proportion  to  the  amount  of  their  respective  claims. 
Thus  if  all.  the  debts  are   $50,000,  and  all  the  money 
$20,000,  each  creditor  receives  40  per  cent  of  his  claim.    In 
many  States  the  assignee  is  subject  to  the  supervision  of 
some  court,  and  the  proceedings  are  in  effect  court  pro- 
ceedings. 

5.  A  Preference  in  a  general  assignment  is  a  provision 
in  it  that  certain  creditors  shall  be  paid  in  full  before  any 
others  are  paid  at  all.     This  makes  an  unequal  division  of 
the  property.     Some  States  entirely  forbid  preferences. 

6.  Involuntary  Process. — Some  States  have  a  process  by 
which  a  failing  debtor's  property  may  be  taken  from  him 
without  his  consent  in  order  to  be  distributed  among  the 
creditors  equitably. 

7.  Discharge  of  Debtor. — So  far  we  have  considered  only 
the  first  object  of  a  bankrupt  law,  the  distribution  of  the 
property ;  let  us  now  consider  the  second,  the  discharge 
of  the  debtor.     The  making  an  assignment,  i.e.,  giving  up 
all  his  property,  does  not  discharge  him  from  his  debts 
unless  they  are  paid.     The  discharge  is  granted  by  a  court 
under  certain  conditions,  but  there  is  no  uniformity  in  the 
different  States.     In  some,  it  is  granted  if  a  certain  propor- 
tion (30  to  70  per  cent)  of  the  debts  are  paid  ;  in  others,  if 
a  certain  proportion  of  the  creditors  consent  to  it ;  in  others 
no  discharge  is  ever  granted. 

8.  Effect  of  Discharge. — The  residence  of  the  creditor  is 
of  great  importance  in  determining  the  effect  of  a  discharge 


Bankruptcy.  199 


under  a  State  law.  In  general,  if  he  lives  in  the  State 
where  the  discharge  is  granted,  the  discharge  cancels  the 
debt,  as  if  it  were  paid  ;  if  he  lives  in  any  other  State,  the 
debt  is  not  affected.  A  National  law  is  superior  to  a  State 
law  chiefly  because  it  affects  all  debts  alike. 

9.  Release  by  Creditors. — Any  creditor  may  release  his 
debtor  from  the  debt.  Thus,  by  obtaining  a  release  from 
each  creditor,  the  debtor  may  accomplish  his  own  discharge 
without  reference  to  where  they  live.  This  is  perhaps  the 
most  common  method  pursued,  and  is  called  a  compromise. 
The  debtor  agrees  to  pay  some  percentage  of  the  debts,  and 
the  creditors  agree  to  release  him,  believing  that  they  could 
get  no  more  in  any  other  way.  Should  the  debtor,  in  such 
a  case,  secretly  agree  to  pay  some  creditor  more  than  his 
proper  share,  in  order  to  get  him  to  consent  to  it,  such 
agreement  would  not  only  be  void  but  would  render  the 
whole  release  by  the  other  creditors  void. 


200  Particular  Cases. 

SUMMARY  OF  LEADING  RULES. 
I.  AGREEMENTS  FOR  PERSONAL  SERVICES. 

1.  When  services  are  requested  there  is  always  an  IM- 
PLIED CONTRACT  TO  PAY  what  they  are  worth. 

2.  It  is  an  implied  part  of  every  agreement  to  render 
services  that  the  work  will  be  done  with  ordinary  SKILL, 

CARE,  AND  DILIGENCE. 

3.  Any  one  having  the  property  of  another  in  his  hands 
upon  which  he  has  done  work  MAY  KEEP  it  until  he  is 
paid  for  his  work. 

II.  TRANSPORTATION  OF  GOODS. 

1.  A  COMMON  CARRIER  is  one  whose  business  is  to  trans- 
port from  place  to  place  the  goods  of  any  one  who  may  em- 
ploy him. 

2.  A  common  carrier  is  OBLIGED  by  law  TO  TAKE  any 
goods  that  are  offered  to  him  for  transportation  to  any 
point  on  his  route. 

3.  Common  carriers  MAY  KEEP  the  goods  they  have  trans- 
ported until  their  charges  are  paid. 

4.  Common  carriers  are  RESPONSIBLE  FOR  ANY  LOSS  or 
injury  occurring  to  goods  which  they  are  transporting. 

III.  SHIPPING. 

1.  Transfer  oi  the  BILL  OF  LADING  carries  the  ownership 
of  the  goods. 

2.  Carriers  by  sea  are  NOT  RESPONSIBLE  for  damages 
which  occur  through  some  extraordinary  peril  of  the  sea. 

3.  If  any  part  of  the  vessel  or  cargo  is  voluntarily  SAC- 


Summary. 


RIFJCED  TO  SAVE  the  rest,  all  the  owners  of  both  vessel  and 
cargo  must  bear  the  loss  in  proportion  to  their  interests. 

4.  Any  one  SAVING  PROPERTY  which  he  finds  abandoned 
at  sea  is  entitled  to  large  compensation  for  his  services. 

IV.  FIRE  INSURANCE. 

1.  FIRE  INSURANCE  is   a  contract  to   indemnify  the 
owner  of  certain  property  if  it  is  damaged  or  destroyed  by 
fire. 

2.  The  company  is  responsible  for  all  damage  done  by 
the  fire,  or  done  in  PUTTING  OUT  the  fire. 

3.  The  prudent  rule  is  always  to  OBTAIN  the  company's 
CONSENT  to  any  change  in  the  property,  its  position,  or  its 
ownership. 

4.  The  AMOUNT  TO  BE  PAID  in  fire  insurance  is  the 
amount  of  the  loss  unless  that  exceeds  the  amount  of  the 
policy,  and  then  only  the  amount  of  the  policy. 

5.  In  fire  insurance  each  company  where  there  are  sev- 
eral must  pay  that  PROPORTION  of  the  loss  which  its  policy 
bears  to  the  whole  amount  of  insurance. 

V.  MARINE  INSURANCE. 

1.  MARINE  INSURANCE  is  a  contract  to  pay  the  owner  of 
certain  property  a  certain  proportion  of  his  loss  if  it  is 
damaged  or  destroyed  while  on  the  sea. 

2.  In  marine  insurance  the  RISKS  ASSUMED  are  not  only 
that  of  fire,  but  also  all  the  extraordinary  perils  attending  a 
sea  voyage. 

3.  The  AMOUNT  TO  BE  PAID  in  marine  insurance  is  that 
proportion  of  the  loss  which  the  amount  of  the  policy  bears 
to  the  value  of  the  property. 


202  Particular  Cases. 

4.  If  the  loss  is  partial  but  amounts  to  more  than  half 
the  property  in  value,  its  owner  has  the  RIGHT  TO  GIVE  UP 
to  the  company  what  remains  and  claim  the  full  amount  of 
the  policy. 

VI.  LIFE  INSURANCE. 

1.  LIFE  INSURANCE  is  a  contract  to  pay  a  certain  sum 
of  money  on  the  death  of  a  certain  person  or  when  he 
reaches  a  certain  age. 

2.  The  insurance  ceases  if  the  PREMIUM  is  not  paid  when 
due. 

3.  In  every  assignment  the  prudent  rule  is  to  OBTAIN  the 
company's  CONSENT. 

VII.  PLEDGING  OF  PROPERTY. 

1.  A  PLEDGE  is  an  agreement  between  a  debtor  and 
creditor  by  which  the  former  gives  the  latter  certain  per- 
sonal property  as  security  for  the  debt. 

2.  The  CREDITOR  MAY  KEEP  the  property  pledged  to  him 
until  the  debt  is  paid,  or  if  not  paid  when  due  he  may  sell 
the  property. 

3.  The   DEBTOR  MAY,  at  any  time  before  it  is  sold, 
REDEEM  his  property  by  paying  the  debt. 


Review  Questions.  203 


REVIEW   QUESTIONS. 

1.  What  is  an  agreement  for  personal  services?    State  the  two 

kinds,  with  examples  of  each. 

2.  What  is  the  consideration  in  such  an  agreement? 

3.  When  nothing  is  said  about  price  or  payment  at  the  time  of  em- 

ployment, what  (if  anything)  is  due?  Why?  When  must 
services  be  paid  for  in  advance?  When  not? 

4.  State  the  substance  of  an  employe's  agreement,  as  to  what  care, 

etc.,  must  be  taken.  Is  one  who  agrees  to  do  certain  work 
and  who  gets  others  to  do  it  for  him,  responsible  for  what 
those  others  do  or  neglect  to  do?  Why?  Is  it  always  enough 
to  take  as  good  care  of  others'  goods  as  one  takes  of  one's 
own?  Why?  If  one,  through  carelessness,  loses  goods,  is  he 
entitled  to  compensation  for  work  he  has  done  on  them?  Is 
he,  when  lost  without  his  fault?  In  each  case  who  bears  the 
loss  of  the  property? 

5.  When,  and  for  how  long  has  one,  who  has  done  work  upon 

something  belonging  to  another,  a  right  to  keep  that  article? 

6.  When  one  is  hired  for  three  months  at  so  much  a  week,  when 

does  the  employment  end?  When  hired  at  so  much  a  week 
but  for  no  particular  time?  In  the  first  case,  when  may  the 
employer  discharge  the  employe?  When  in  the  second? 
What  is  the  effect  of  a  discharge  before  the  time  has  expired? 
The  effect  of  the  employe's  leaving  before  the  time  has  ex- 
pired? 

7.  What  is  a  common  carrier?    Name  some.     A  private  carrier? 

8.  May  a  common  carrier  refuse  to  take  goods  offered?     Why? 

May  he  charge  different  rates  to  different  parties? 

9.  With  whom  does  a  carrier  contract,   the  sender  or  receiver? 

State  three  ways  the  carrier  has  to  obtain  payment. 

10.  State  the  rule  as  to  a  carrier's  responsibility  for  loss  or  injury  to 

goods. 

11.  To  what  kinds  of  vessels  does  the  law  of  shipping  apply?    What 

is  a  shipper?  A  charter-party?  When  a  ship  is  chartered  by 
one,  who  is  the  carrier,  he  or  the  ship-owner? 


204  Particular  Cases. 

12.  What  is  a  bill  of  lading?  A  consignor?  A  consignee?  State 
how  and  by  whom  a  bill  of  lading  may  be  transferred.  The 
effect  of  such  transfer. 

13  How  does  the  responsibility  of  a  carrier  by  sea,  for  loss  or  in- 
jury to  goods,  differ  from  that  of  a  carrier  by  land? 

14.  Describe  general  average.     The  three  conditions  under  which  it 

is  allowed.  Give  examples  of  some  losses  where  there  would, 
and  some  where  there  would  not,  be  any  general  average 
claim. 

15.  What  is  salvage?    Its  amount?    To  whom  given? 


16.  What  is  fire  insurance?    An  insurer?    An  insured?    An  under- 

writer? A  policy?  May  an  insurance  contract  be  oral?  Is  it 
usually?  What  is  the  premium? 

17.  For  what  time  is  fire  insurance  usually  made?    What  is  a  re- 

newal?   Its  effect? 

18.  For  what  kinds  of  damage  is  a  company  liable  under  a  fire 

policy? 

19.  If  a  policy  provides  that  it  shall  not  be  binding  until  the  premium 

is  paid,  and  a  fire  occurs  before  the  premium  is  paid,  is  the 
company  responsible?  How  would  it  be  in  that  case,  if  the 
owner  had  paid  the  premium  to  his  broker  but  the  latter  had 
not  paid  it  to  the  company?  Is  a  policy  ever  binding  without 
payment  of  premium? 

20.  If  property  is  sold  after  being  insured,  does  the  buyer  get  the 

benefit  of  the  insurance?  What  is  the  effect  upon  the  policy 
of  increasing  the  danger  of  fire?  Of  what  changes  should  the 
owner  notify  the  company? 

21.  If  in  a  fire  the  damage  is  less  than  the  amount  of  the  policy  what 

amount  must  the  company  pay?  If  it  be  more  than  the  amount 
of  the  policy?  What  is  it  to  be  fully  insured? 

22.  Explain  how  two  or  more  companies  which  have  insured  the 

same  property  ordinarily  share  the  loss  when  there  is  a  fire. 

23.  Is  the  company  responsible  when  the  fire  is  caused  by  careless- 

ness? Is  it  when  the  owner  purposely  set  the  property  on  fire? 
Is  it  when  the  owner  does  not  try  to  put  out  the  fire? 

24.  The  effect  of  misrepresentations  at  the  time  the  policy  is  made? 

Of  what  more  general  rule  is  that  an  illustration? 
25    Are  all  the  provisions  of  a  policy  binding? 


Review  Questions.  205 

26.  How  does  marine  insurance  differ  from  fire  insurance,  as  to  the 

property  insured?  As  to  the  risks?  Name  the  usual  perils 
insured  against  in  marine  insurance,,  and  explain,  as  to  each, 
how  there  may  be  a  loss  under  it. 

27.  State  two  ways  in  which  marine  policies  are  drawn  as  to  the  time 

the  insurance  is  to  last.  State  two  ways  as  to  the  property  to 
be  insured. 

28.  In  what  case  is  the  policy  void  until  the  premium  is  paid? 

When  is  the  premium  said  to  be  earned? 

29.  When  property  insured  is  sold,  how  can  the  buyer  obtain  the 

benefit  of  the  insurance? 

30.  If  property  is  insured  for  a  particular  voyage,  and  the  vessel 

deviates  from  its  course,  what  is  the  effect  upon  the  policy? 

31.  The  effect  of  the  amount  of  insurance  named  in  the  policy? 

What  does  the  insurer  pay  in  case  of  partial  loss?  In  case  of 
total  loss? 

32.  Explain  the  proportions  of  the  loss  to  be  paid  by  several  compa- 

nies which  have  insured  the  same  property. 

33.  The  effect  of  inserting  the  value  of  the  property  in  the  policy. 

34.  State  the  rule  as  to  misrepresentations. 

35.  What  is  seaworthiness?    If  an  insured  vessel  is  lost  because  it  is 

unseaworthy,  who  bears  the  loss,  the  owner  or  the  company? 
If  insured  goods  are  lost  upon  an  unseaworthy  vessel,  is  the 
company  responsible? 

36.  What  do  the  words  "  lost  or  not  lost,"  in  a  policy,  mean? 

37.  What  is  abandonment?     When  has  the  owner  that  right? 


38.  What  is  life  insurance?    In  what  particulars  different  from  fire 

and  marine  insurance? 

39.  Can  one  insure  his  life  for  his  own  benefit?    For  the  benefit  of 

any  one  else?  If  one  insures  his  life,  the  amount  to  be  paid  to 
his  wife,  have  his  creditors  any  claim  upon  it?  What  is  it  to 
insure  the  life  of  another?  May  oue  insure  any  other  person's 
life? 

40.  The  effect  of  non-payment  of  a  premium? 

41.  What  should  be  done  in  case  of  assignment  of  a  policy? 

42.  State  the  application  to  life  insurance,  of  the  rule  as  to  mis- 

representations. 

43.  What  is  interest?    Difference  between  interest  and  dividends? 


206  Particular  Cases. 

44.  State  the  three  general  classes  of  cases  in  which  a  debtor  must 

pay  interest. 

45.  What  is  meant  by  the  legal  rate?    What  is  the  most  common 

legal  rate  in  the  United  States?     Is  it  always  usury  to  take 
more  than  the  legal  rate? 

46.  Who  is  punished  for  usury,  the  borrower  or  lender?    Name  the 

three  most  common  kinds  of  penalties. 


47.  What  is  a  pledge?    Can  lands  be  pledged?    State  the  three 

elements  necessary  to  constitute  a  pledge.  State  some  other 
kinds  of  security  besides  pledge.  What  is  collateral? 

48.  What  are  the  creditor's  rights  over  the  property  he  holds  in 

pledge?    What  must  he  do  before  he  can  sell? 

49.  Who  owns  the  property  while  it  is  pledged,  the  creditor  or  the 

debtor?  Who  owns  negotiable  paper  while  it  is  pledged? 
Can  pledged  negotiable  paper  be  sold  before  the  debt  is  due  so 
as  to  make  any  one  else  the  owner?  Can  other  property? 

50.  What  right  has  the  debtor  up  to  the  time  the  property  is  sold? 

51.  What  is  a  pawnbroker?    What  is  the  difference  between  a  pledge 

and  a  chattel  mortgage? 

52.  What  are  the  two  branches  of  banking  as  a  business?    What  is 

the  contract  made  between  a  bank  and  one  who  deposits 
money  with  it? 

53.  Explain  the  discounting  of  paper,  when  it  has  the  nature  of  a 

loan,  and  when  of  a  sale. 


54.  What  is  a  hotel  keeper?    State  the  three  elements. 

55.  Can  a  hotel  keeper  refuse  to  receive  any  one  who  comes  to  his 

hotel?     When? 

56.  What  is  the  hotel  keeper's  lien? 

57.  State  the  rule  as  to  a  hotel  keeper's  responsibility  for  the  loss  of 

a  guest's  property. 

58.  What  are  the  differences  between  a  hotel  keeper  and  a  boarding- 

house  keeper  as  to  their  rights  and  duties? 

59.  State  six  common  kinds  of  lien,  and  how  long  each  lasts. 


30.  In  the  sending  of  a  telegram,  between  whom  is  the  contract 
made?   What  does  each  agree?    State  the  rule  as  to  accuracy. 


Review  Questions.  207 

As  to  secrecy.  Is  the  company  responsible  for  a  loss  to  the 
person  receiving  a  dispatch,  occasioned  by  its  carelessness? 
Why? 

61.  What  is  a  patent?    What  does  it  secure?    The  object  of  granting 

patents?  How  obtained?  For  what?  For  how  long?  Can 
foreigners  obtain  them? 

62.  If  one  person  obtains  a  patent  for  an  improvement  on  a  machine 

already  patented,  does  it  give  him  the  right  to  use  the  latter 
with  his  improvement? 

63.  Explain  the  difference  between  the  sale  of  a  patent  and  of  a 

patented  article;  what  rights  does  each  carry? 

64.  What  is  infringement?     How  prevented? 

65.  Is  there  such  a  thing  as  a  void  patent?     How  is  the  question 

settled  in  any  case?  How  is  notice  given  that  an  article  is 
patented? 

66.  What  is  a  copyright?    What  does  it  secure?    The  object  of 

granting  copyrights?  How  obtained?  For  what?  For  how 
long?  Can  foreigners  obtain  them? 

67.  How  is  infringement  prevented? 

68.  Can  the  work  of  a  foreign  author  be  published  by  any  one  here 

without  his  permission?  How  is  notice  given  that  a  book  is 
copyrighted? 

69.  What  is  a  trade-mark?    What  does  it  secure?    Can  any  one  but 

the  owner  of  the  trade-mark  make  articles  like  those  to  which 
it  is  attached?  State  two  objects  in  allowing  trade-marks. 
How  acquired  ?  How  long  does  the  right  last?  Can  foreigners 
obtain  them? 

70.  How  is  infringement  prevented? 


71.  What  is  a  bankrupt?    An  insolvent?    State  two  general  objects 

of  a  bankrupt  law. 

72.  What  is  a  general  assignment?    Has  a  debtor  always  the  right  to 

pay  one  creditor  and  not  another?  What  are  an  assignee's 
duties  under  a  general  assignment?  What  is  a  preference?  Is 
it  legal? 


208  Particular  Gases. 

73.  Does  the  making  of  a  general  assignment  discharge  the  debtor 

from  his  debts?  How  is  the  discharge  obtained?  Has  a 
debtor  always  the  right  to  a  discharge? 

74.  Is  there  any  national  bankrupt  law  now?    "What  is  the  effect  of  a 

discharge  under  some  State  law  upon  debts  due  to  creditors 
living  in  that  State?  Upon  other  debts? 

75.  Is  there  any  other  way  for  a  debtor  to  become  released  from  his 

debts?  If  in  a  compromise  and  release  the  debtor  secretly 
agrees  to  pay  some  creditor  more  than  the  rest,  is  that  promise 
binding?  What  is  its  effect? 


ADDED  OHAPTEES 

ON 

BEAL  ESTATE. 


CHAPTER  XLIH. 

KINDS  OF  INTEEEST  IN   EEAL  ESTATE. 

1.  Eeal  Estate. — All  property  is  divisible  into  two  kinds, 
real  estate  (also  called  real  property),  and  personal  property. 
Real  estate   means  land  and  everything  growing  or  built 
upon  it,  such  as  trees,  houses,  etc.     Or  we  may  say  that 
real  estate  means  land,  and  that  the  houses,  trees,  etc.,  are 
a  part  of  the  land.     Personal  property  includes  everything 
else.     Thus,  all  the  capital  stock  of  railroad  companies  and 
other  corporations  is  personal  property,  even  though  the 
property  of  the  corporation  consists  only  of  land.     A  note, 
draft,  or  claim  upon  a  debtor  is  personal  property.     Some 
kinds  of  real  property  may  become  personal  under  some 
circumstances.     Thus  trees  growing,  and  coal  in  the  mine, 
are  real,  but  when  the  trees  are  cut  down,  and  the  coal  is 
mined,  they  become  personal.     In  the   same  way  when  a 
post  is  set  upon  land  it  changes  from  personal  to  real.* 

2.  Kinds  of  Interest. — There  is  much  variety  in  the 
kinds  of  interest  or   ownership  which  may  be  had  in  real 

*  The  word  "real  "  in  the  phrase  does  not  have  the  sense  of  true, 
for  personal  property  is  just  as  truly  property,  but  refers  rather  to  its 
fixed,  immovable  character.  Personal  property,  on  the  other  hand, 
is  in  general  movable  property.  So  far  in  this  book  we  have  been 
concerned  only  with  personal  property. 


210  Real  Estate. 


property.  It  may  be  full  and  absolute  ownership,  or  it  may 
be  conditional,  to  end  if  a  certain  event  happens,  as  when 
a  widow  receives  property  which  she  is  to  lose  if  she  marries 
again,  or  as  when  a  railroad  company  is  given  land  on  con- 
dition that  its  road  is  built  within  a  certain  time.  Again,  the 
ownership  may  be  given  to  one  without  limit  as  to  the  time 
for  which  it  is  to  last,  or  it  may  be  limited  to  his  lifetime, 
after  which  the  property  is  to  go  to  some  one  else  who  is 
named  (sec.  4).  Again,  one  may  have  an  interest  or  kind 
of  ownership  in  property,  while  his  right  to  use  it  is  de; 
ferred  until  some  future  time  (sec.  5).  Still  again,  one 
may  have  the  right  to  use  certain  property  for  a  certain 
definite  period,  as  for  a  year.  That  is  a  tenant's  interest, 
but  it  is  not  called  an  ownership.  In  this  chapter  we  shall 
consider  only  the  kinds  of  ownership.  (See  Chap.  XLVIII.) 
More  than  one  person  may  have  the  same  kind  of  owner- 
ship in  the  same  land  at  the  same  time  (sec.  6).  It  will  be 
seen  that  two  persons  may  also  have  different  kinds  of 
ownership  in  the  same  property  at  the  same  time,  as  where 
one  owns  a  life  interest  and  another  a  future  interest.  (See 
also  sec.  7. ) 

3.  Full  Ownership. — In  this  country  by  far  the  greater 
part  of  the  real  estate  is  owned  in  full  absolute  ownership 
— in  legal  terms,  it  is  owned  in  fee-simple.  One  may  do 
what  he  chooses  with  property  he  owns  in  full.  He  may 
use  it,  sell  it,  or  give  it  away,  or  at  his  death  give  it  by  will 
to  whomsoever  he  chooses.  He  may,  if  he  wishes,  destroy 
any  of  it,  as  for  instance  by  tearing  down  a  house.  He  in- 
jures no  one  else  by  doing  so,  because  no  one  else  has  any 
ownership  in  it  to  be  injured,  and  his  power  over  it  is  un- 
limited so  long  as  he  inflicts  injury  on  no  one  but  himself. 

But  yet  there  is  a  certain  limitation  upon  his  use  of  it, 
which  is  embodied  in  the  rule  that  no  one  has  a  right  to  use 
his  own  property  in  such  a  way  a«  to  injure  otters  or  their 


Kinds  of  Ownership.  211 

property.*  Thus,  no  one  has  a  right  to  maintain  upon  his 
property  something  which  is  a  public  nuisance,  such  as  a 
very  offensive  trade,  etc.  If  A  and  B  are  adjoining  owners 
and  A  digs  a  cellar  for  his  house,  he  must  not  dig  it  in  such 
a  way  as  to  cause  any  of  B's  land  to  fall  into  the  pit. 

4.  Life  Ownership. — Property  may  be  given  to  one  to 
hold  and  enjoy  as  long  as  another  person  lives  (e.g.,  to  A 
to  own  during  B's  life),  but  ordinarily  where  there  is  a  life 
limitation  it  is  for  the  life  of  the  person  himself  (i.e.,  to  A 
to  own  during  his  own  life).  In  a  life  ownership  the  owner 
may,  during  that  time,  use  the  property  as  he  sees  fit,  and 
is  entitled  to  all  the  profits  arising  from  it.  He  may  use  it 
himself  or  rent  it  to  others.  Thus  his  rights  are,  as  to  a 
proper  use,  the  same  as  those  of  a  full  owner.  But  we  may 
notice  three  particulars  in  which  his  rights  are  less  than 
those  of  a  full  owner:  (1)  he  cannot  sell  or  mortgage  the 
property;  (2)  he  cannot  control  the  disposition  of  it  at  his 
death;  and  (3)  he  can  do  nothing  with  it  which  will  de- 
crease its  value,  as  by  taking  down  buildings,  cutting  down 
trees,  etc. 

As  to  selling,  a  life  owner  cannot  sell  the  property  itself 
so  as  to  give  the  buyer  the  full  ownership,  for  that  would 
be  selling  what  he  has  not  himself.  But  he  can  sell  or 
mortgage  what  he  has,  viz.,  his  life  ownership,  and  in  that 
case  a  buyer  would  obtain  the  right  to  use  it  so  long  as  the 
first  party  lived.  Thus  if  A  had  a  life  ownership  and  sold 
it  to  B,  B  would  own  it  during  A's  life.  In  the  same  way 
the  creditors  of  a  life  owner  can  never  take  the  property, 
but  only  A's  interest  in  it.  If  he  rents  it  the  tenant  must 
give  it  up  at  his  death.  As  to  willing  away  the  property,  it 
must  be  seen  that  if  a  life  owner  had  such  a  power  his  in- 
terest would  extend  beyond  his  own  life.  As  to  decreasing 

*  Law  is,  to  a  very  large  extent,  the  balancing  and  adjusting  of 
rights. 


212  Real  Estate. 


its  value  he  cannot  do  that  because  others  have  an  interest 
in  it  (sec.  5).  He  may  use  it,  but  not  abuse  it.  The  life 
owner  must  pay  the  ordinary  taxes  laid  upon  the  property. 
A  life  ownership  may  arise  in  several  different  ways. 
The  following  ways  are  some  of  the  most  common.  (1)  A 
full  owner  may,  during  his  life  or  at  his  death,  give  a  life 
ownership  to  one  for  whom  he  wishes  to  provide  but  to 
whom  he  does  not  care  to  give  the  power  to  dispose  of  the 
property  (e.g.,  a  father  and  a  spendthrift  son).  (2)  A  widow 
is  by  law  entitled  to  a  life  interest  in  one-third  of  all  the 
lands  which  her  husband  has  owned  since  their  marriage, 
unless  he  has  conveyed  them  away  and  she  has  joined  in  the 
deed  with  him.  That  is  called  her  dower.  (3)  In  many 
States  a  widower  is  entitled  to  a  life  interest  in  all  the  lands 
which  his  wife  has  owned  since  their  marriage,  provided  a 
child  has  been  born,  and  unless  he  has  conveyed  them  away 
with  her. 

5.  Future   Interest. — By  this  we  mean  an  ownership 
where  the  right  to  use  the  property  itself  depends  upon 
some  future  event.     In  a  sense,  the  person  having  such  a 
future  interest  is  an  owner  now.     Thus,  there  is  always  a 
future  interest  connected  with  a  life  interest,  for  there  is 
some  one  else  who  is  to  take  the  property  when  the  life 
owner  dies.     Neither  of  them  can  affect  the  other's  owner- 
ship.    The  owner  of  a  future  interest  has  no  right  to  any 
use  of  the  land  until  the  event  happens,  and  then  his  inter- 
est is  in  some  cases  full  ownership,  in  others  life  owner- 
ship, etc.     The  interest  of  a  child  during  his  parent's  life 
in  the  latter's  property  is  not  a  future  interest  in  land,  as 
we  here  use  the  term.     It  is  not  a  legal  claim  or  right. 
The  parent  may  sell  or  lose  the  land,  or  leave  it  to  others 
by  his  will.     But  a  future  interest  is  itself  property,  which 
no  one  can  deprive  the  owner  of  without  his  consent. 

6.  Joint  Ownership  is  where  two  or  more  persons  together 


Kinds  of  Ownership.  213 

own  and  possess  the  same  property  at  the  same  time.  It 
is  different  from  the  case  of  a  present  owner  and  the  owner 
of  a  future  interest  (sec.  5),  for  in  joint  ownership  each 
has  a  present  and  equal  right  to  possession.  The  relation 
may  arise  in  several  ways.  It  arises  when  property  is  given 
by  deed  as  a  single  piece  to  two  or  more.  On  the  death  of 
a  person  without  a  will  his  heirs  become  joint  owners  of 
his  real  estate.  Each  joint  owner  is  said  to  have  an  un- 
divided share  of  the  whole,  and  the  shares  may  be  some- 
times unequal.  But  unless  the  will  or  the  deed  or  the  law 
creating  the  joint  ownership  specially  designates  the  pro- 
portions, the  shares  are  all  equal.  All  may  use  the  prop- 
erty together,  and  each  is  entitled  to  a  proportionate  share 
of  the  profits.  Each  may  sell  to  any  one  his  individual 
share.  If  all  sell  together  to  the  same  person  he  be- 
comes sole  owner.  Joint  owners  may  divide  the  property 
among  themselves,  and  thus  make  themselves  separate 
owners  of  the  separate  parts.  If  they  cannot  agree,  any 
one  of  them  may  bring  a  suit,  and  the  court  will  divide  the 
property  among  them  according  to  their  relative  interests. 
7.  Trusts. — It  is  sometimes  desired  to  give  one  the  bene- 
fits arising  from  the  ownership  of  certain  property  (the  in- 
come), but  without  the  right  to  manage  or  dispose  of  it,  as 
where  a  parent  is  providing  for  children  too  young  to  be 
able  to  manage  property  themselves.  This  is  done  by 
giving  the  property  to  a  third  person,  who  is  called  the 
trustee,  and  laying  upon  him  the  duty  of  managing  the 
property  and  applying  the  profits  to  the  use  of  the  person 
to  be  benefited.  A  trust  is  a  holding  of  property  for 
another's  benefit.  The  powers  of  the  trustee  over  the 
property  are  governed  by  the  deed  or  will  creating  the 
trust,  and  are  different  in  different  cases.  Sometimes  his 
only  duty  is  to  collect  rents  and  pay  them  over;  sometimes 
he  has  power  to  sell  the  land  and  invest  the  money  other- 


214  Real  Estate. 


wise.  The  position  is  one  requiring  perfect  good  faith. 
The  trustee  can  do  nothing  with  the  estate  to  benefit  him- 
self. The  person  for  whose  benefit  the  property  is  held 
has  no  power  over  it,  and  in  many  cases  cannot  even  trans- 
fer to  another  his  right  to  receive  the  income.  * 

8.  Law  of  State. — Contracts  with  regard  to  personal 
property,  we  have  seen  (p.  124),  are  governed  by  the  law  of 
the  State  where  they  are  made,  but  the  rule  of  real  estate 
is  entirely  different.  All  contracts  and  other  matters  affect- 
ing real  estate  are  governed  by  the  law  of  the  State  where 
the  land  lies.  Hence  all  deeds,  mortgages,  leases,  etc., 
must  be  made  to  conform  to  the  law  of  the  State  in  which 
the  real  estate  is  situated,  no  matter  where  the  parties  live, 
or  where  the  deed  or  other  contract  is  made. 


CHAPTEE  XLIV. 

EIGHTS   INCIDENT  TO   OWNERSHIP. 

1.  Two  Kinds.— There  are  two  kinds  of  rights  which  an 
owner  of  certain  land  has  or  may  have  in  connection  with 
his  ownership,  and  dependent  upon  it,  (1)  rights  concern- 
ing that  land  itself,  or  things  upon  it,  and  (2)  rights  to  be 
exercised  over  land  belonging  to  another  owner.  Those  of 
the  first  kind  do  not  have  to  be  specially  acquired,  but 
always  exist.  They  are  implied  in  the  term  ownership. 
But  those  of  the  second  kind  do  not  exist  unless  they  have 
been  specially  acquired.  We  shall  in  this  chapter  give 

*Some  of  the  statements  of  this  chapter  will  apply  also  to  personal 
property.  Thus,  there  may  be  a  life  ownership,  or  future  owner- 
ship of  it,  but  they  are  not  common.  It  is,  however,  often  rented, 
and  held  in  trust. 


Rights  Incident  to  Ownership.  216 

some  instances  of  the  two  kinds  separately  (sec.  2-9).  The 
word  appurtenance  means  a  minor  article  or  right  belong- 
ing to  certain  real  estate.  All  the  rights  belonging  to  the 
second  kind  are  called  appurtenances,  and  some  of  those  in 
the  first  (sec.  2). 

a.  Rights  over  One's  Own  Property. 

2.  In  General — A  person  who  owns  land  owns  not  only 
the  surface  but  also  everything  below  and  above  it.  His 
property  extends  downward  to  the  center  of  the  earth  and 
upward  indefinitely.  Thus  he  owns  all  the  metals,  stone, 
oil,  coal,  water  and  everything  else  which  he  may  find 
underneath  the  surface,  and  has  the  sole  right  to  extract 
them.  He  owns  also  everything  above  the  land  which  is 
affixed  to  it,  such  as  houses,  trees  or  crops.  Even  if 
houses  are  built  upon  land,  or  other  additions  made  to  it 
by  one  not  the  owner,  they  become  the  property  of  the 
owner  of  the  land.*  Such  things  as  these,  houses,  miner- 
als, trees,  etc.,  being  always  firmly  planted  or  imbedded  in 
the  earth  itself,  are  considered  as  a  part  of  the  land.  The 
use  of  the  word  "land"  includes  all  such  things  upon  or 
in  it.  But  there  are  also  certain  other  things  to  which  the 
word  appurtenances  applies,  and  which  are  also  considered 
as  a  part  of  the  property  even  when  away  from  it.  They 
are  such  things  as  the  keys,  doors,  windows,  and  blinds 
of  a  house,  unless  they  have  been  permanently  separated 
from  it. 

The  rights  of  an  owner  over  his  own  property  are  ex- 
clusive. No  one  else  may  even  come  upon  it  without  per- 
mission. An  owner,  or  one  having  the  right  to  possess 
land,  has  the  right  to  use  all  the  force  necessary  to  put  off 
and  keep  off  any  one  whom  he  wishes  to. 

*  But  see  p.  239,  sec.  10,  for  an  exception  to  this  rule. 


216  Heal  Estate. 


3.  Highways. — An  owner  of  property  bounded  by  a  road 
or  street  usually  owns  the  property  to  the  center  of  the 
street.     The  public  has  the  right  to  pass  over  it,  to  use  it 
as  a  road,  but  does  not  own  it.     The  adjoining  owner  may 
use  it  in  any  way  which  does  not  interfere  with  that  right, 
though  there  are  perhaps  few  ways  in  which  he  could  make 
use  of  it  without  obstructing  it,  or  otherwise  interfering 
with  its  use  by  the  public,  or  its  regulation  by  the  public 
authorities.     If,  however,  it  should  be  abandoned  as  a  road 
it  would  then  belong  to  him  again.* 

4.  Streams. — The  owner  of  property  has  the  right  to  use 
a  stream  which  flows  through  his  land,  so  far  as  that  use 
does  not  perceptibly  diminish  its  volume,   or  change  its 
course,  or  in  any  way  prevent  a  similar  use  of  it  by  other 
owners  upon  it.     Thus  he  may  use  it  to  water  his  cattle, 
or  irrigate  his  land,  or  to  run  a  mill  with,  provided  it  flows 
out  of  his  land  at  the  usual  point,   and  substantially  as 
large  as  it  has  customarily  been  at  that  point.    Each  owner 
has  all  these  rights,  but  each  must  exercise  them  in  such  a 
way  as  to  injure  no  other  owner  (p.  210,  sec.  3).     An  owner 
may  build  a  dam  upon  his  own  land,  but  not  so  high  as  to 
cause  the  water  to  set  back  upon  his  neighbor's  land,  unless 
with  the  latter's  permission.     If  a  stream  is  the  boundary 
line  between  two  owners,  each  owns  to  the  center,  and 
they  have  an  equal  share  in  the  use  of  it.f 

*  Sometimes  streets  in  cities  belong  not  to  the  adjoining  owners 
but  to  the  city  itself.  In  such  case  the  owner  has  no  greater  right 
over  the  land  on  the  street  than  any  other  citizen. 

f  With  navigable  rivers  the  rule  is  different.  The  State  owns  the 
river,  and  owners  whose  lands  adjoin  them  have  no  greater  rights  in 
them  than  the  rest  of  the  public 


liights  Incident  to  Ownership. 


b.  Eights  over  Another's  Property. 

5.  Right  of  Way.  —  We  come  now  to  the  second  kind, 
viz.,  those  rights  which  an  owner  of  laud,  or  as  we  may 
say  the   land   itself,  may  have  over    certain   other  land. 
They  also  are  said  to  be  appurtenant  to  the  land  which  owns 
them.     Such  a  right  may  be  of  almost  any  character.     A 
common  one  is  a  right  of  way,  i.e.,  a  right  belonging  to 
one  owner  to  pass  over  another  owner's  property  at  a  cer- 
tain place  ;  in  other  words,  a  private  road  or  path  over  one 
piece  of  land,  leading  to  and  belonging  to  another  piece  of 
land.     Such  a  right  may  be  very  essential,  for  if  it  is  land 
not  bordering  upon  some  public  road  its  owner  without 
such  a  right  has  no  way  to  get  upon  it,  for  no  one  has  the 
right—  unless  it  is  given  him—  to  even  step  upon  another's 
land.     Such  a  way  must  be  used  only  for  its  original  pur- 
pose.-   Thus,  if  the  right  granted  be  only  a  foot-path,  it 
cannot  be  used  for  horses.     But  it  may  be  used  as  often  or 
by  as  many  as  the  owner  of  the  right  chooses  to  allow. 

6.  Other  Rights,  analogous  to  a  right  of  way,  are,  the 
right  of  the  owners  of  one  piece  of  land  to  go  upon  other 
land  to  fish,  to  cut  and  take  from  it  a  certain  amount  of 
wood,  to  draw  water  from  a  spring,  etc.     One  owner  on  a 
stream  may  acquire  the  right  to  build  a  dam  and  thus  over- 
flow another's  land.    Under  some  circumstances  one  owner 
may  even  acquire  the  right,  as  against  the  owners  of  adjoin- 
ing land,  to  maintain  a  nuisance,  such  as  a  noxious  trade, 
on  his  own  land. 

7.  Party-  Walls.  —  A  party-  wall  is  a  wall  used  jointly  by 
two  estates.     It  is  usually  one  built  on  the  dividing  line 
between  the  estates,  half  on  one  side  and  half  on  the  other, 
and  it  is  frequently  the  case  in  cities  that  both  of  the  side 
walls  of  a  house  are  of  this  character.    In  a  party-wall  each 
owner  owns  that  part  which  is  on  his  own  land,  and  also 


Real  Estate. 


owns  the  right  to  have  the  rest  of  the  wall  stand  though  it 
is  not  on  his  land.     Neither  has  the  right  to  take  down 
even  that  part  which  is  his  own,  without  the  other's  con 
sent. 

8.  Restrictive  Rights. — The  rights  which  the  owners  of 
one  piece  of  land  may  have  over   other  land  are  of  two 
kinds,  (1)  active,  and  (2)   restrictive.      The  examples  we 
have  already  given  have  been  of  active  rights,  i.e.,  rights  to 
use  the  other  land  in  some  way,  or  to  take  something  from 
it.     Restrictive  rights  are  those  which  prevent  the  owner 
of  the  other  land  doing  something  which  he  otherwise  might 
do.     They  may  be  of  almost  any  nature.     A  common  ex- 
ample is  where  the  owner  of  certain  property  has  acquired 
the  right  to  prevent  certain  other  property  being  used  for 
particular  purposes,  such  as  that  no    buildings   shall  be 
placed  upon  it,  or  only  dwelling  houses  costing  a  certain 
amount.     (Seep.  224,  sec.  11,  and  foot-note.) 

9.  The  Transfer  of  a  piece  of  land  carries  with  it  all  the 
appurtenances  and  rights  of  whatever  nature   connected 
with  that  land,  whether  they  are  mentioned  in  the  deed  or 
not.     Though  it  is  common  in  deeds  to  mention  appur- 
tenances (see  form  38,  clause  d],  yet  it  is  not  necessary. 
Each  successive  owner  of  the  land  has  the  same  rights, 
and  each  owner  loses  those  rights  as  he  parts  with  the  land. 
It  is  thus  convenient  to  say,  as  we  have  done,  that  they 
belong  to  the  land.     That  is  what  is  meant  by  "appurte- 
nant."    And  if  any  land  is  subject  to  any  such  right  be- 
longing to  other  land,  its  transfer  from  one  owner  to  an- 
other cannot  affect  the  right. 

10.  Acquisition  of  Right. — Rights  of  the  first  kind,  those 
over  one's  own  land,  we  have  said,  do  not  have  to  be  acquired. 
If  I  own  property  I  have  all  those  rights  over  it,  unless  I 
or  some  prior  owner  has  granted  them  away.     But  those 
of  the  other  kind,  rights  over  others'  land,  must  be  ac- 


Deeds.  219 

quired  and  can  be  acquired  in  only  one  of  two  ways  :  (1) 
by  being  at  some  time  expressly  or  impliedly  granted  by 
the  owners  of  the  other  land,  or  (2)  by  being  exercised  for 
twenty  years  uninterruptedly.  But  once  acquired  they  last 
forever,  unless  surrendered. 


CHAPTER  XLV. 

DEEDS. 

1.  Definition. — A  deed  of  real  estate  is  a  written  paper 
transferring  the  ownership  from  one  person  to  another.    It 
is  when  delivered  a  contract.    Like  a  sale  of  personal  prop- 
erty it  is  an  executed  contract,  an  agreement  that  some- 
thing is  done,  not  that  something  will  be  done  hereafter. 
(See  p.  86.)     But  there  may  be  a  contract  for  the  future 
sale  of  land.    The  land  does  not  however  become  the  prop- 
erty of  the  buyer's  until  a  deed  is  given.     All  transfers  of 
land  by  one  owner  to  another  are  done  by  deed. 

2.  Necessity. — A  deed  is  necessary  to  every  such  trans- 
fer.    Thus  if  A  should  sell  land  to  B,  and  B  should  take 
possession  of  it  without  a  deed,  nevertheless  it  would  not 
be  a  transfer  of  ownership.     The  property  would  still  be- 
long to  A.     No  matter  how  full  and  how  clearly  proven 
the  oral  agreement  was  it  would  be  of  no  avail.    A  contract 
for  the  future  sale  of  real  estate  must  also  be  in  writing. 
The  reason  for  this  is  the  same  as  that  which  requires  writ- 
ing in  other  cases,  viz.,  that  the  act  is  so  important  a  one 
that  the  evidence  of  it  should  be  something  more  certain 
and  enduring  than  spoken  words  (p.  22). 

3.  Contents. — The  forms  of  deeds  in  use  in  the  different 
States  differ  from  each  other  in  some  particulars.    In  each 


Real  Estate. 


State  also  we  shall  find  two  or  three  different  forms  in  use. 
Again,  most  deeds  contain  clauses  which,  though  valid  and 
binding  agreements  upon  the  parties,  are  not  necessary 
parts  of  the  deed,  as  a  deed  (sec.  11).  But  there  are  cer- 
tain provisions  which  every  deed  must  contain  in  order  to 
be  a  deed  and  transfer  the  ownership.  These  are  five  in 
number:  (1)  the  name  (or  other  identification)  of  the 
party  to  whom  the  property  is  transferred,  (2)  an  adequate 
description  of  the  property,  (3)  some  appropriate  words  of 
transfer,  (4)  the  signature  of  the  owner,  and  (5)  a  seal. 
On  p.  298  is  given  a  form  of  what  is  called  a  full  covenant 
and  warranty  deed.  It  has  been  in  use  many  years,  and 
contains  many  words  which  in  very  many  cases  would  be 
of  no  use.  The  clause  a  down  to  the  words  "  in  considera- 
tion," the  clauses  b  and  c,  the  signatures,  and  the  seals, 
comprise  all  that  is  strictly  necessary  to  transfer  the 
ownership.  We  will  consider  the  five  essentials  in  order.  * 
4.  Party. — The  party  who  is  to  take  the  property  must 
be  named.  This  does  not  mean  that  his  full  name  must 
necessarily  be  used  (though  that  is  best),  but  simply  that 
some  one  must  be  specified  in  the  deed.  A  deed  to  no  one 
is  a  nullity.  If  the  place  for  the  name  is  left  blank,  it 
must  be  filled  up  before  the  deed  is  delivered.  If  full 
ownership  of  the  land  is  to  be  given  it  is  necessary  in  a  few 
States  to  add  to  the  name  the  words,  "  and  his  heirs" 
(clause  Z>). 

*That  part  of  a  beginning  "in  consideration"  is  useful  and  for 
some  purposes,  which  we  will  not  consider  here,  is  necessary.  Clause 
d  is  superfluous  because  a  grant  of  the  land  in  most  cases  includes 
all  the  things  there  named  (p.  218,  sec.  9).  In  clause  e  is  usually 
inserted  the  provision  showing  what  sort  of  ownership  is  to  be  given. 
Thus,  if  a  life  ownership  is  to  be  given,  it  should  read  at  the  end 
"for  the  term  of  his  natural  life"  instead  of  "  forever."  As  it  stands 
in  the  form  it  simply  repeats  the  last  part  of  clause  b. 


Deeds.  221 

5.  Description. — The  property  must  be  described  with 
sufficient  distinctness  to  be  distinguished  from  all  other 
property.     Yet  the  description  need  not  be  as  exact  as  in 
the  form  given  (clause  c).     In  country  property  it  is  usual 
to  describe  it  with  reference  to  the  property  of  neighbors, 
e.g.,  "five  acres  bounded  westerly  by  the  land  of  Mr.  13., 
northerly  by  land  of  the  late  .  .  .  ,"  etc.    Any  description 
which  identifies  it  is  sufficient.     Thus,  "  my  farm  on  the 
Bronx"  would  suffice,  unless  I  owned  two  farms  on  the 
Bronx. 

6.  Words  of  Transfer. — The  words  of  transfer  commonly 
used  are  "grant,  bargain,  sell  and  convey,"  oftentimes 
with  others.     Probably  in  most  cases  the  use  of  one  word, 
such  as  "grant,"  would  be  sufficient,  though  it  is  advisable 
always  to  use  all  of  them  and  to  follow  the  forms.     One 
form  of  deed  which  is  used  without  covenants  (called  a 
quit-claim  deed)  has  the  words  "remise,  release  and  quit- 
claim."    They  have  substantially  the  same  effect  as  the 
other  words  given.     The  deed  should  also  specify  the  kind 
of  ownership  to  be  given,   whether  full  ownership,   life 
ownership,  etc.,  whether  absolute  or  conditional,  etc.    Full 
and  absolute  ownership  would  ordinarily  be  implied  unless 
it  expressly  provided  otherwise.* 

7.  Signing. — In  most  of  the  States  a  deed  must  be  signed, 
witli  the  owner's  name.     It  need  not  be  signed  by  the  one 
receiving  the   land.     If  the  person  cannot  write  he  must 
make  his  mark,  and  his  name  must  be  signed  by  some  one 
else.     Instead  of  being  done  personally  it  may  be  done  by 
an  agent,  but  his  authority  to  do  so  must  be  in  a  written 
instrument  signed   by  the  owner  himself.     The  wife  or 

*In  deeds,  as  iu  all  contracts,  the  kind  of  language  used,  whether 
English,  German,  or  any  other,  and  whether  good  or  bad  in  spelling 
or  grammatical  construction,  is  of  not  the  slightest  consequence 
legally,  provided  that  the  meaning  can  be  gathered  from  the  paper. 


222  Real  Estate. 


husband  of  an  owner  should  sign  it  with  him  or  her,  for 
we  have  seen  that  they  have  a  possible  future  interest  in 
each  other's  property  (p.  212,  sec.  4).  In  many  States,  also, 
one  or  two  witnesses  must  sign  the  deed. 

8.  Seal — A  seal  is  a  necessary  part  of  a  deed  in  most 
States.     It  may  be  a  piece  of  paper  wafered  or  gummed  to 
the  instrument,  and  in  many  States  it  is  sufficient  if  a  cir- 
cle or  scrawl  is  made  with  the  pen  opposite  the  signer's 
name.     Any  one  may  attach  the  seal  provided  it  is  done  be- 
fore the  deed  is  delivered. 

Note  to  Teacher. — In  matters  of  detail  concerning  the  form  and  exe- 
cution of  deeds,  mortgages,  etc.,  there  is  much  diversity  among 
the  States.  For  particulars  in  those  respects  reference  should  be 
had  to  the  Statutes  of  the  particular  State,  and  to  the  blank 
forms  to  be  obtained  at  the  stationer's. 

9.  Delivery. — Delivery  of  the  executed  deed  to  the  party 
to  whom  the  property  is  transferred   is  the  last  and  most 
important  act  of  all,  and  without  it  there  can  be  no  trans- 
fer.    It  is  the  act  which  gives  efficacy  to  all.     The  convey- 
ance takes  effect  from  the  time  the  delivery  is  made.  Thus 
after  the  deed  is  drawn  and  signed,  it  may  be  destroyed  or 
kept  in  the  signer's  possession;  the  property  still  remains 
the  former  owner's.     But  if  finally  delivered,  even  though 
it  should  be  years  afterward,  the  ownership  would  imme- 
diately change.     After  delivery  the  loss  or  destruction  of 
the  deed  would  not  change  the  ownership.      Delivery  may 
be  made  to  the  party  himself  or  to  any  one  authorized  to  re- 
ceive it  for  him,  and  a  person  may  be  so  authorized  orally. 
We  may  add,  that  to  make  a  transfer  the  deed  must  also  be 
accepted.     No  one  can  be  made  an  owner  by  deed  without 
his  consent. 

10.  Acknowledgment  is  not  generally  necessary  to  make 
a  deed  complete  and  binding  upon  the  person  signing  it, 
but  it  is  mentioned  here  because  it  is  commonly  practiced, 


Deeds.  223 

and  is  very  useful  and  essential  for  some  purposes  (sec  p. 
234  sec.  7).  It  is  made  before  delivery  of  the  deed,  and 
consists  of  two  acts:  (I)  The  party's  going  before  a  certain 
officer  to  whom  he  is  known,  and  acknowledging  to  him 
that  the  deed  is  his  own  deliberate  act,  and  (2)  that  officer's 
attaching  to  the  deed  his  certificate  that  the  party  has  done 
so.  Each  State  designates  certain  officers  before  whom 
acknowledgments  of  deeds  and  other  instruments  affecting 
land  in  that  State  may  be  made.  Notaries  Public  and 
Commissioners  of  Deeds  are  the  most  numerous  classes. 
The  exact  form  of  the  acknowledgment  and  of  the  certifi- 
cate differs  in  the  different  States  (form  42).  In  some 
States  an  affidavit  made  before  the  officer  by  a  witness  who 
has  signed  the  deed  will  take  the  place  of  an  acknowledg- 
ment (form  43). 

11.  Covenants. — So  far  we  have  considered  the  essentials 
of  a  deed;  but  many  deeds  contain  additional  agreements 
called  covenants.  They,  though  not  a  part  of  the  deed  as 
a  deed,  being  merely  personal  agreements  relating  to  the 
land,  are  often  very  valuable  to  the  purchaser  as  security, 
their  purpose  being  to  secure  him  in  the  possession  of  the 
property  or  to  reimburse  him  if  some  one  with  a  prior 
right  takes  it  from  him.  The  six  covenants,  /,  g,  h,  i,  j 
and  Tc,  in  the  form,  are  all  used  together  in  some  States; 
others  use  only  some  of  them;  and  very  frequently  only  the 
last  one,  k,  is  used. 

The  clauses  /,  g,  h  and  k  have  nearly  the  same  legal 
effect,  and  we  will  consider  them  together.  In  every  sale 
of  personal  property  the  seller  impliedly  guarantees  his 
ownership,  i.  e.,  agrees  to  reimburse  the  buyer  if  the  prop- 
erty turns  out  not  to  be  his  (p.  95).  But  there  is  no  such 
implied  agreement  in  the  sale  of  real  estate.  By  simply 
granting  the  land  without  covenant  the  seller  only  grants 
such  right  as  he  has,  and  if  some  one  else  proves  himself  to 


224  Real  Estate. 


have  a  better  right  or  a  prior  claim  to  the  property  or  any 
of  it,  the  buyer  must  stand  the  loss.  But  with  one  of  those 
four  covenants  in  his  deed  he  has  a  right  to  claim  reim- 
bursement from  the  seller.  Each  one  is  an  agreement  that 
he  shall  not  be  injured  by  the  loss  of  the  property,  through 
the  seller's  not  having  the  right  to  grant  all  he  professed 
to.  The  clause  i  means  this,  that  if  there  are  any  taxes 
or  other  charges  against  the  property  the  seller  will  pay 
them.  The  covenant  j  is  another  one  with  the  same  gen- 
eral purpose,  viz.,  to  secure  to  the  purchaser  the  full  and 
absolute  right  to  the  property  which  he  is  buying. 

Deeds  not  infrequently  contain  other  covenants  with 
various  objects.  One,  sometimes  found  in  deeds  of  city 
lands  and  called  a  covenant  against  nuisances,  has  for  its  ob- 
ject the  keeping  of  that  property  or  of  all  the  property  with- 
in a  certain  locality  free  from  certain  objectionable  trades.* 

*  Thus,  suppose  that  an  owner  of  a  block  of  land,  who  was  selling 
portions  of  it  from  time  to  time  to  different  parties,  desired  that  no 
part  of  it  should  be  used  for  such  purposes,  in  order  that  it  might  be 
suitable  for  residences.  He  might  insert  in  every  deed  a  covenant  such 
as  that  given  in  form  39.  Again,  the  buyer  of  a  lot  under  the  same 
circumstances  might  desire  to  protect  himself  against  having  such 
trades  established  on  the  remaining  portions  of  the  block.  In  such 
case  the  covenant  would  read  to  the  same  effect,  substituting  the 
name  of  the  seller  for  that  of  the  buyer,  and  describing  the  property 
to  be  subject  to  the  covenant,  i.e.,  on  which  the  trades  should  not  be 
permitted.  TUe«e  rights  would  then  form  appurtenances  belonging 
to  the  resp<*etivfc  pieces  of  land  (p.  218,  sec.  8). 


Mortgages.  225 

CHAPTER  XLVL 

MOETGAGES. 

1.  Definition. — A  mortgage  *  of  real  estate  is,  in  effect, 
substantially  a  pledge  of  the  real  estate  for  the  performance 
of  some  act,  usually  for  the  payment  of  a  certain  amount 
of  money.     The  person   owning  the  property,  borrowing 
the  money,  and  giving  the  pledge,  is  called  the  mortgagor.* 
The  person  lending  the  money,  and  receiving  the  pledge, 
is  called  the  mortgagee.*     A  mortgage  is  not  a  transfer 
of  the    property,    but    only  a   security.      The    borrower 
remains  its  owner,   and  when   he  repays  the  money  the 
mortgage  is  wholly  discharged.      It  is  different  from  a 
pledge  of  personal  property  in  some  particulars.     In  the 
latter  the  creditor  takes  the  property  and  has  two  rights, 
a  right  to  keep,  and  a  right  to  sell  (p.   181),  but  in  a 
mortgage  in  this  country  the  mortgagor  usually  keeps 
possession  of  the  property  and  the  mortgagee  has  only 
the  right  to  sell  it  or  to   take   it,  if   the  debt  is  not 
paid  when  due.     The  mortgagor  rents  it,  uses  it,  takes 
all  the  profit  or  income  arising  from  it,  and  exercises  all 
the   other    rights  of  ownership;  the  mortgagee  exercises 
none.f 

2.  Bond. — When  the  mortgage  is  given  to  secure  the  re- 
payment of  a  loan  it  is  usual  for  some  instrument  to  be 

*  Pronounced  mor'-gaje,  mor-ga-jor',  mor-ga-jee' . 

f  The  laws  of  the  different  States  are  not  uniform  upon  the  subject 
of  the  exact  legal  character  of  mortgages,  and  in  some  of  them  the 
mortgagee  may  perhaps  be  considered  the  owner  of  the  property  con- 
ditionally. But  sec.  1  represents  correctly  th°  practical  effect  in 
most  of  them. 


226  Real  Estate. 


given  to  re-present  the  loan,  some  promise  to  repay  it. 
This  in  some  States  is  in  the  form  of  a  bond  (form  40),  in 
others  simply  a  note.  The  wording  of  a  bond  is  rather  pe- 
culiar. The  one  in  form  40  represents  a  loan  of  $10,000. 
On  its  face  it  is  a  promise  to  pay  $20,000  unless  $10,000 
(the  real  debt)  is  paid.  But  even  though  the  debt  should 
not  be  paid  the  larger  amount  would  not  be  due.  Only 
the  actual  amount  due,  i.e.,  the  debt  and  interest,  could 
ever  be  demanded.  In  other  words  the  bond  has  just  the 
same  effect  as  a  note  for  the  smaller  amount  would  have. 
A  mortgage  would  be  good  without  a  bond  or  note,  pro- 
vided that  a  real  debt  existed.* 

3.  Contents. — A  deed  is  very  different  in  its  effect  from  a 
mortgage,  for  the  former  transfers  the  ownership,  and  the 
latter  does  not.  But  when  we  come  to  examine  the  form 
of  mortgage  generally  in  use  we  find  it  to  be  in  form  a 
deed.  The  main  clauses  in  the  two  are  the  same  (compare 
clauses  b,  c,  d,  and  e  in  forms  38  and  41).  But  there  is 
one  important  difference,  viz.,  that  in  the  mortgage  there 
is  an  additional  clause,  providing  that  the  grant  shall  be  of 
no  effect  if  the  money  is  paid  (clause  /),  and  that  is  the 
clause  which  changes  the  paper  from  a  deed  into  a  mort- 
gage-1 

A  mortgage  of  real  estate  must  be  in  writing.     Being  in 

*  Yet  the  debt,  i.e.,  the  claim,  is  the  real  thing  owned  by  the  mort- 
gagee. The  mortgage  is  something  incidental  to  it.  For  this  reason 
one  to  whom  a  mortgagee  is  about  to  transfer  a  mortgage  should  be 
careful  to  obtain  the  bond  or  note  also.  It  might  happen  in  some 
States  that  if  the  bond  was  transferred  to  one  and  the  mortgage  to 
another  the  latter  would  receive  nothing. 

f  Thus  a  real  estate  mortgage  in  its  form  is  similar  to  a  chattel 
mortgage  (compare  forms  34  and  41).  It  is  not  however  a  conditional 
sale  (p.  183),  and  the  property  does  not  immediately  belong  to  the 
mortgagee  when  the  mortgagor  fails  to  pay  the  debt,  as  is  the  case 
with  a  chattel  mortgage. 


Mortgages.  227 

form  a  deed,  it  must  contain  all  the  essentials  required  in  a 
deed  (See  Chap.  XLV.,  sec.  3-9).  It  shoiild  contain  also  the 
additional  clause  providing  that  it  shall  be  void  if  the 
money  is  paid  as  agreed,  or  some  clause  showing  that  it  is 
not  intended  as  an  absolute  transfer.  It  must  be  delivered 
to  be  effectual.  It  ought  to  be  acknowledged.  All  these 
requirements  being  the  same  as  those  we  have  considered  in 
the  chapter  on  deeds,  and  having  the  same  limitations,  it 
is  necessary  here  only  to  refer  to  them. 

4.  Additional  Agreements. — A  mortgage  does  not  usually 
contain  the  covenants  found  in  deeds  (p.  223,  sec.  ll),though 
there  is  no  reason  why  it  should  not.     It  does,  however, 
often   contain  additional    agreements,  which  are  binding 
in  every  respect,  though  not  necessary  parts  of  the  mort- 
gage as  a  mortgage.     Clause  i  in  form  41  is  an  exam- 
ple of  one.     A  common  agreement  often  inserted  in  the 
bond,    but  which   might  be    put    in    the    mortgage  in- 
stead, is  this,  that  if  the  borrower  shall  fail  to  pay  interest 
regularly  on  the  money  borrowed,  the  whole  amount  of  the 
debt  shall  become  due  immediately.     Thus  in  form  40,  if 
the  interest  due  upon  February  1,  1883,  remained  unpaid 
until  March  4,  1883,  the  $10,000  would  immediately  be- 
come due.     This  enables  the    mortgagee  to  enforce  his 
rights  by  foreclosure  as  soon  as  the  first  default  inpayment 
of  interest  is  made,  without  waiting  for  the  time  to  expire 
for  which  the  loan  was  made. 

5.  Foreclosure.  — A  mortgage  gives  to  the  mortgagee  a  cer- 
tain claim  against  the  land.    Foreclosure  means  the  method 
of  enforcing  that  claim,  or  in  other  words  the  method  by 
which  the  land  is  appropriated  to  satisfy  the  debt.     Its  re- 
sult is  to  deprive  the  mortgagor  of  his  ownership.     Fore- 
closure cannot  be  resorted  to  unless  the  debtor  fails  to  keep 
his  agreement  or  some  part  of  it,  as  by  not  paying  the  debt 
when  it  becomes  due,  or  in  case  of  a  bond  and  mortgage  like 


228  Real  Estate. 


the  ones  in  forms  40  and  41  by  not  paying  the  interest  regu- 
larly.* 

The  methods  of  foreclosing  mortgages  in  the  different 
States  are  various,  and  some  States  allow  of  more  than  one 
method.  The  most  common  course  is  for  the  mortgagee 
to  bring  a  suit,  in  the  course  of  which  it  is  decreed  that 
the  property  be  sold  at  auction.  Out  of  what  is  obtained 
for  it  upon  the  sale  the  mortgagee  is  paid  the  amount  of 
his  claim,  and  the  surplus  (if  any)  is  given  to  the  mortga- 
gor. If  it  does  not  bring  sufficient  to  pay  the  mortgagee  a 
judgment  is  rendered  against  the  mortgagor  for  the  de- 
ficiency. After  such  a  sale  the  mortgagor  has  no  further 
ownership  in  the  property.  Thus  it  is  that  the  final  effect 
of  the  mortgage  is  a  sale. 

6.  Transfer. — Both  the  mortgage  and  the  property  mort- 
gaged can  be  sold.  Thus  if  A  owes  B  $5000  to  secure  which 
he  has  given  B  a  mortgage  upon  certain  property,  B  owns 
the  debt  secured  by  the  mortgage,  and  A  still  owns  the 
property,  subject  to  the  mortgage  however.  Either  may 
sell  what  he  owns,  and  the  purchaser  will  obtain  just  the 
rights  which  the  seller  had  and  no  others.  Thus  if  B  sells 
his  bond  (or  note)  and  mortgage  to  C,  C  obtains  the  right 
to  foreclose  if  the  debt  is  not  paid  when  due.  On  the 
other  hand,  A  may  sell  the  property,  but  no  matter  how 
many  hands  it  passes  through  it  still  remains  subject  to 
the  mortgage.  Thus  if  A  sells  it  to  D  and  D  to  E,  E  must 
see  to  it  that  the  interest  is  paid  regularly,  and  that  every 
other  agreement  of  the  mortgage  is  carried  out,  or  the 
owner  of  the  mortgage  will  have  the  right  to  foreclose.  A 

*  Mortgages  upon  which  the  interest  is  regularly  paid  are  very 
often  allowed  to  stand  for  years  after  the  principal  becomes  due, 
because,  the  principal  being  secure,  interest  is  all  the  creditor  wants. 
But  he  has  the  right  to  foreclose  at  any  time  if  the  debt  has  become 
due. 


Mortgages.  229 

change  of  ownership  in  either  the  mortgage  or  the  prop- 
erty does  not  change  the  relative  rights  of  the  parties. 

7.  Assuming    Mortgage. — When  property  upon   which 
there  is  a  mortgage  is  sold,  that  fact  is  usually  mentioned 
in  the  deed,  and  in  one  of  the  two  following  ways,  (1)  in 
words  which  simply  call  attention  to  the  fact,  and  (2)  in 
words  which  imply  an  agreement  on  the  purchaser's  part  to 
pay  the  mortgage.     The  first  way  is  where  such  words  as 
these  are  used,  "  subject  to  a  certain  mortgage."  The  second 
is  where  the  deed  says  "  subject  to  a  certain  mortgage  which 
is  hereby  assumed,"  or  "  subject  to  the  payment  of  a  certain 
mortgage,"  for  those  words  imply  an  agreement  to  pay.     So 
far  as  the  mortgagee's  rights  to  satisfy  the  mortgage  out  of 
the  property  are  concerned,  it  makes  no  difference  which  way 
is  followed,  for,  for  that  purpose,  the  mortgage  need  not  be 
mentioned  at  all  (sec.  6),  but  the  two  ways  have  very  differ- 
ent effects  upon  the  purchaser's  responsibility.     If  the  first 
is  used,  i.e.,  if  the  deed  simply  states  that  the  property  is 
subject  to  a  certain  mortgage,  that  does  not  bind  the  pur- 
chaser to  pay  it,  but  if  the  purchaser  agrees  in  his  deed  to 
pay  it,  then  he  must  pay  it  all.     If  the  property  was  cer- 
tainly worth  more  than  the  amount  of  the  mortgage  it 
would  make  no  difference  to  any  one  which  way  was  taken, 
but  if  it  was  not,  and  a  sale  of  it  upon  foreclosure  did  not 
bring  the  amount  of  the  mortgage,  the  purchaser  would  be 
liable  for  the  deficiency  if  the  second  way  had  been  used, 
but  not  if  the  first  had  been  used.* 

8.  Other  Liens. — A  person   may  after  mortgaging  his 
property  to  one,  mortgage  it  again  to  another.    The  second 
mortgagee  then  obtains  all  the  rights  of  a  mortgagee,  but 

*Thus  if  property  mortgaged  for  $5000  sells  upon  foreclosure  for 
$4000,  $1000  of  the  debt  remains  due.  A  purchaser  who  had  bought 
it  "  subject  to  the  mortgage"  would  not  be  responsible  for  the  $1000; 
one  who  had  "assumed  the  mortgage"  would  be. 


230  Real  Estate. 


subject  to  the  rights  of  the  first  mortgagee.  In  other 
words  the  second  mortgage  is  a  mortgage  of  the  value  re- 
maining above  the  first  mortgage.  A  second  mortgagee 
may  foreclose,  but  the  sale  is  a  sale  subject  to  the  first 
mortgage,  and  if  the  property  is  worth  more  than  the 
amount  of  the  first,  the  second  obtains  the  surplus  ;  if  it  is 
not,  the  second  obtains  nothing.  There  are  other  charges 
or  liens  *  which  may  exist  against  real  property.  One  kind 
is  a  judgment  for  money  (p.  41).  If  a  judgment  is 
filed  against  a  person  in  a  county  in  which  he  owns  real 
estate,  it  is  a  lien  against  that  property  for  a  certain  period 
(a  few  years) ;  in  other  words  the  creditor  may  have  that 
property  sold  to  satisfy  the  judgment  at  any  time  within 
the  period,  whosoever  may  meanwhile  have  come  to  be  its 
owner.  Where  there  are  several  liens  against  the  same 
property  they  take  precedence  of  each  other  in  the  order  of 
time  in  which  they  arose.  Taxes  form  an  exception  to  this 
rule.  They  are  a  first  lien  without  reference  to  when  they 
became  due.f 

*A  lien  or  a  charge  upon  real  estate  means  substantially  a  right  to 
sell  it  to  satisfy  some  claim,  no  matter  into  whose  hands  it  may 
come.  A  lien  upon  real  estate  is  different  from  a  lien  upon  personal 
property.  Each  means  substantially  a  right  to  sell  the  property  to 
satisfy  the  claim,  but  in  the  latter  there  is  also  a  right  to  keep  (p.  181). 
The  former  may  exist  without  the  person  who  owns  it  having  the 
property,  the  latter  cannot. 

fThus,  let  us  suppose  a  piece  of  property  mortgaged  to  B  for 
$5000,  on  January  5th,  to  C,  for  $3000,  on  July  8th,  that  there  was 
a  judgment  obtained  against  its  owner  on  July  7th,  for  $500,  and 
that  taxes  upon  it  to  the  amount  of  $250  became  due  on  November 
27th.  If  now  the  owner  of  the  first  mortgage  should  foreclose,  and 
tho  property  should  sell  for  $7000,  the  different  liens  would  be  paid 
in  this  order,  (1st)  the  taxes,  (3d)  the  first  mortgage,  (3d)  the  judg- 
ment, and  (4th)  the  second  mortgage.  Thus  the  second  mortgagee 
would  lose  a  part  of  his  claim.  If  the  second  mortgagee  foreclosed, 
he  could  only  sell  the  land  subject  to  the  prior  liens. 


Recording.  231 

9.  Searching  the  Title. — We  thus  see  that  when  one  is  pur- 
chasing real  estate  he  should  be  careful  to  ascertain  before- 
hand what  mortgages  or  other  liens  exist  against  it.  The 
process  of  doing  so,  and  of  examining  the  successive  deeds 
of  the  property  to  ascertain  whether  they  have  been  drawn 
and  executed  properly,  is  called  searching  the  title,  and 
forms  one  part  of  a  lawyer's  occupation.  Every  real  estate 
lien,  to  be  available  as  such,  must  be  recorded  in  a  certain 
public  office,  and  these  records  are  accessible  to  any  one 
who  chooses  to  consult  them. 


CHAPTEK  XLVII. 

RECORDING    OF   DEEDS   AND   MORTGAGES. 

1.  Should  be  Recorded. — After  a  deed  or  mortgage  has 
been  signed,  sealed  and  delivered,  there  is  one  thing  more 
usually  done  with  it,  which  though  not  necessary  to  make 
it  a  complete  deed  or  mortgage,  is  necessary  to  make  the 
purchaser  or  mortgagee  secure:  that  is  to  record  it  in  the 
proper  office.     Each  county  has  an  office  in  which  are  kept 
books  for  the  recording  of  the  deeds  and  mortgages  of  land 
in  that  county.     Into  these  they  are  copied  in  full,  the 
originals  being  returned  when  copied  to  their  owners.     An 
instrument  is  considered  to  be  on  record  from  the  moment 
it  is  handed  in  to  the  office.     It  is  not  recorded  when  re- 
corded in  the  wrong  office. 

2.  Object  of  Record.— The  object  of  the  laws  with  regard 
to  record,  which  exist  in  every  State,  is  to  prevent  fraud, 
by  affording  a  way  by  which  any  one  who  intends  to  buy 
land  can  ascertain  whether  the  seller  has  the  right  to  sell 


232  Real  Estate. 


Such  fraud  might  be  committed  in  different  ways.  Thus, 
one  might  pretend  to  own  property  that  he  did  not,  or  that 
he  had  recently  sold,  or  an  owner  might  mortgage  his  prop- 
erty to  one  person  to-day  and  to  another  to-morrow,  con- 
cealing the  first  mortgage  from  him.  In  such  cases  it 
might  happen  that  a  person  would  have  little  opportunity 
to  protect  himself  beforehand,  unless  there  were  some  office, 
open  to  the  public,  where  he  might  find  all  the  papers  af- 
fecting the  property.  But  if  such  a  paper  is  recorded  that 
is  notice  to  all  the  world  that  it  exists  and  of  its  contents, 
for  any  one  by  searching  can  find  it.  Eecording  is  there- 
fore giving  notice.  * 

3.  Not  Essential  as  to  Signer. — But  one  who  signs  a 
deed  or  mortgage  does  not  need  any  notice  of  it.  Conse- 
quently, recording  is  not  essential  as  against  him.  An  un- 
recorded deed  is  valid  as  against  him,  and  so  far  as  he  is 
concerned  makes  the  other  party  the  owner  just  as  fully  as  if 
it  had  been  recorded.  Having  given  a  deed  he  can  never 
claim  the  land  again;  or  if  he  has  given  a  mortgage  he  can 
never  maintain  that  the  land  is  not  subject  to  it.  An  un- 
recorded instrument  has  its  full  effect  also  against  the  heirs 
of  the  signer,  for,  giving  nothing  for  the  land  themselves 
they  cannot  be  defrauded.  ^Recording  is  meant  to  protect 
only  those  who  part  with  something,  or  bind  themselves  to 

*  Recording  protects  against  the  fraud  of  one  who  pretends  to  have 
what  he  has  not,  but  not  against  the  fraud  of  one  who  pretends  to  be 
a  person  that  he  is  not.  Against  that  there  are  two  means  of  pro- 
tection, the  acknowledgment  (see  p.  234,  sec.  7,  and  form  42),  and 
the  law  against  forgery.  It  may  be  asked  why  there  is  not  a  system 
of  recording  transfers  of  personal  property,  as  well  as  of  real  estate. 
Two  reasons  are,  (1)  its  impracticability  owing  to  the  frequency  with 
which  it  changes  hands,  and  is  divided  up,  and  even  changes  its 
character,  and  (2)  because,  personal  property  being  movable,  there 
arises  more  of  a  presumption  of  ownership  from  its  mere  posses- 
sion. 


Recording.  233 

do  so,  upon  the  faith  of  there  being  no  unrecorded  instru- 
ments. 

4.  The  Effect  of  not  Recording. — Thus  it  is  third  parties 
who  are  to  be  protected.     The  way  in  which  the  protection 
is  accomplished  is  this:  the  record  shows  them  all  instru- 
ments that  have  been  recorded,  and  the  law  provides  that 
all  that  have  not  been  recorded  shall  be  of  no  effect  as  to 
them.     No  unrecorded  instrument  can  affect  the  interest  of 
one  who  holds  a  recorded  one  from  the  same  party,  even 
though  the  other  is  prior  to  his.     Hence  the  effect  of  not 
recording  a  deed  or  mortgage  is  to  make  it  void  so  far  as 
it  would  affect  the  interest  of  all  parties  who  subsequently 
acquire  an  interest  in  the  land  either  by  way  of  ownership 
or  of  lien.     It  is  therefore  greatly  to  the  interest  of  one  re- 
ceiving such  a  paper  (not  to  the  other)  to  have  it  placed  on 
record  immediately.     The  recording  law,  while  protecting 
him  against  other  prior  unrecorded  instruments,  must  also 
protect  subsequent  parties  against  his.* 

5.  Examples. — The   following  cases  will    illustrate   the 
principles  of  the  last  two  sections: 

(1)  If  A  sells  to  B  and  B  neglects  to  record  his  deed, 
and  A  afterward  sells  to  C,  C  becomes  the  owner.  B's  deed 
becomes  wholly  void.  (2)  If  A  gives  a  mortgage  to  B, 
which  B  neglects  to  record,  and  A  afterward  sells  to  C,  C 
takes  the  land  free  from  the  mortgage.  Thus  the  mort- 
gage may  be  void,  but  A's  debt  to  B  still  remains.  (3)  If 
A  sells  to  B,  and  B  neglects  to  record  his  deed,  and  A 
afterward  gives  a  mortgage  to  C,  C's  mortgage  is  valid  and 
effectual  against  the  land,  but  B  still  owns  the  balance  of 
the  property,  for  A  himself  could  never  dispute  the  unre- 
corded deed.  It  is  valid  as  to  him.  (4)  If  A  gives  B  a 

*  In  some  States  a  certain  time  is  allowed  in  which  to  make  the 
record  (fifteen  days  to  three  months),  and  yet  obtain  all  its  advan- 
tages. In  others  it  should  be  made  immediately. 


234  Real  Estate. 


mortgage  which  B  neglects  to  record,  and  afterward  gives 
C  another  mortgage,  C's  mortgage  takes  precedence  of 
B's,  but  B's  would  still  be  valid  against  A  as  if  recorded. 

Note  to  Teacher. — By  giving  a  value  to  the  property,  and  amounts 
to  the  mortgages,  the  amount  of  interest  which  one  may  have  in 
recording  a  paper  may  be  brought  out  in  a  strong  light.  It 
should  be  remembered  also  that  though  a  neglect  to  record  does 
not  always  result  in  loss  yet  the  danger  always  exists. 

6.  Good  Faith. — We  have  seen  that  only  those  are  to  be 
protected  who  have  parted  with  something  (sec.  3).     So 
also  only  those  deserve  protection  who  have  acted  in  good 
faith.     Therefore  any  one  who  acts  with  knowledge  of  any 
unrecorded  deed  or  mortgage  cannot  take  advantage  of  the 
fact  of  its  not  being  recorded.    To  allow  him  to  do  so  would 
be  to  allow  fraud.    If  he  knows  of  it  his  claim  will  always  be 
subject  to  it,  though  his  own  deed  or  mortgage  is  recorded 
first.     Possession  of  land  is  also  notice  to  all  others  that 
the  possessor  has  some  right  in  it,  and  in  some  States  one 
who  takes  a  deed  or  mortgage  from  one  who  is  not  in  pos- 
session (i.e.,  not  using  it,  renting  it,  etc.)  takes  it  subject  to 
the  claim  of  the  one  in  possession,  even  though  the  latter's 
deed  is  not  on  record. 

7.  Acknowledgment  is  an  essential  pre-requisite  to  the 
right  to  record,  and  unless  the  instrument  is  properly  ac- 
knowledged its  record  is  a  nullity.      Proof  by  a  subscribing 
witness  will  in  some  States  supply  its  place.*     For  this 
purpose,  then,  every  deed  and  mortgage  should  be  acknowl- 
edged.    Its  object  is  to  make  sure  that  only  genuine  in- 
struments go  upon  the  record.     Since   the  officer  before 
whom  it  is  made  must  be  acquainted  with  the  parties  who 
make  the  acknowledgment  or  proof,  his  certificate  is  evi- 
dence to  the  recording  officer  that  the  instrument  is  entitled 
to  be  recorded  and  is  not  a  forgery. 

*  See  p.  222,    sec.   10,    for   explanation  of  acknowledgment   and 
proof  by  witness. 


Landlord  and  Tenant.  235 

CHAPTER  XLVIII. 

LANDLORD   AND   TENANT. 

1.  The  Relation. — In  Chapter  XLIII.  we  considered  the 
different  kinds  of  ownership  of  real  property,  and  we  there 
saw  that  one  incident  of  ownership  was  the  right  to  use,  and 
one  method  of  use  was  the  granting  of  that  right  to  others. 
When  the  right  is  granted  temporarily  for  a  consideration 
it  is  called  a  renting.     A  tenant,  then,  is  one  to  whom  the 
owner  of  real  estate  has  granted  the  sole  and  full  use  of  it  for 
a  time,  for  a  consideration  to  be  paid  by  him.     The  owner  is 
then   called  his   landlord.     This  relation  arises  as  much 
when  the  letting  is  of  a  single  room  in  a  house  as  when  it 
is  of  a  whole  house  and  grounds.     But  it  only  arises  from 
agreement.     I  cannot  force  one  to  become  either  my  ten- 
ant or  my  landlord  against  his  own  consent.     Since  a  ten- 
ant has  the  sole  use  of  the  land  he  can  exclude  any  one 
else  from  it,  even  the  landlord  himself.     Having  the  full 
use,  it  must  be  without  burden(except  such  as  he  agrees  to 
take),  and  hence  the  landlord  must  pay  all  taxes  due  upon 
the  land,  and  the  interest  of  mortgages  upon  it.     The  ten- 
ant, on  the  other  hand,  pays  the  landlord  for  this  right 
(sec.  4),  and  the  obligation  to  pay  rent  arises  even  though 
he  did  not  expressly  agree  to  do  so. 

2.  Duration. — The  time  for  which  the  relation  is  to  last 
depends  altogether  on  the  contract.      That  usually  speci- 
fies   a   definite    time,  e.g.,  a  month,  a  year,   five  years, 
fifty  years,  etc.     Where  no  definite  time  is  specified  and  no 
rent  is  to  be  paid,  either  party  may  end  the  tenancy  at  any 
time;  but  if  rent  is  to  be  paid,  it  is  in  most  places  the  law 
that  neither  party  can  terminate  the  tenancy  until  the  ter- 


236  Real  Estate. 


ruination  of  a  year  from  its  commencement,  and  only  then 
when  some  prior  notice  of  his  intention  has  been  given  to 
the  other  party  (see  sec.  11).  The  parties  may  of  course 
end  any  tenancy  by  mutual  agreement  at  any  time.  The 
surrender  of  the  premises  by  the  tenant  and  their  accept- 
ance by  the  landlord  would  accomplish  this.  So  also  would 
the  making  of  a  new  agreement  inconsistent  in  its  terms 
with  the  old  one. 

3.  Lease. — The  agreement   to    rent  is    called   a   lease. 
Leases  must  be  in  writing  and  signed  if  the  time  for  which 
the  tenancy  is  to  last  is  more  than  three  years,*  but  need 
not  in  general  be  sealed.     If  the  time  be  less  than  that,  an 
oral  lease  is  valid.     But  where  one  has  had  the  use  of  cer- 
tain  land,  though   under  a  void   lease,  he   cannot   avoid 
paying  for  that  use.     (See  form  44.) 

4.  Rent  is  something  rendered  by  the  tenant  to  the  land- 
lord in  return  for  the  use  of  the  property.     Usually  this  is 
a  certain  amount  of  money,  due  periodically — so  much  a 
month  or  a  quarter.     Its  amount  and  when  it  is  due  are 
regulated  by  the  lease.     If  the  agreement  is  silent  on  those 
points  the  amount  is  what   the  use  of   the    property  is 
reasonably  worth,  and  the  time  of  payment  is  governed  by 
the  custom  of  the  vicinity.     The  time  for  the  payment  of 
rent  has  nothing  to  do  with  the  length  of  the  lease.     Thus 
it  is  quite  common  to  make  it  payable  monthly  or  quarterly 
during  the  period  for  which  the  lease  is  to  last.     Unless  the 
lease  specifies  that  rent  shall  be  paid  in  advance  it  is  not 
due  until  the  end  of  the  particular  month  or  quarter.     But 
no  custom  can  override  an  express  provision  of  the  lease. 

5.  Sale  of  Property. — The   renting  of   property  by  an 
owner  does  not  take  away  any  of  his  rights,  except  just 
those  rights  which  it  gives  the  tenant,  viz.,  the  right  to 

*  In  a  few  States,  if  more  than  one  year. 


Landlord  and  Tenant.  237 

possess  and  use.  Consequently  the  owner  can  still  sell  his 
ownership  to  another.  The  new  owner  by  such  sale  obtains 
all  the  rights  which  the  seller  had,  and  no  others.  One  of 
these  was  the  right  to  receive  rent  from  the  tenant.  There- 
fore on  a  sale  the  tenant  must  pay  the  rent  to  the  new 
owner.  On  the  other  hand,  a  sale  does  not  lessen  or  change 
a  tenant's  rights  in  any  way.  A  lease  holds  good  not  only 
against  the  original  landlord,  but  also  against  any  one  who 
afterwards  obtains  the  property,  whether  by  sale  from  him 
or  through  his  death.  Thus,  if  after  renting  the  land  the 
landlord  should  mortgage  it,  the  mortgagee's  rights  would 
be  subject  to  those  of  the  tenant,  and  a  sale  on  foreclosure 
could  not  disturb  the  tenant's  possession.  But  if  the  mort- 
gage was  made  before  the  renting,  the  case  would  be  re- 
versed.* 

6.  Assignment  by  Tenant. — The  tenant  also  may  transfer 
his  rights  to  others.  He  may  transfer  them  entirely,  in 
which  case  he  is  said  to  assign  his  lease,  or  he  may  transfer 
but  a  portion  of  them,  as  by  renting  to  another  a  part 
of  the  premises,  in  which  case  he  is  said  to  sublet.\  The 
difference  in  effect  between  a  sublease  and  the  assignment 
of  a  lease  is  this:  in  the  first  case  the  subtenants  bear  no 
relations  to  the  original  landlord,  and  are  not  responsible 
to  him  for  rent,  the  tenant  being  their  only  landlord;  but 
in  the  other  case,  the  new  tenant  becomes  a  tenant  of  the 
landlord,  and  must  pay  him  the  rent.  In  the  first  case  the 
landlord  can  sue  only  his  original  tenant:  in  the  second  he 
can  sue  both  the  original  tenant  and  the  new  one,  having  the 
right,  however,  to  obtain  his  rent  but  once.  But  in  neither 
case  does  the  landlord  lose  any  rights.  If  the  rent  is  not 

*  These  rules  are  only  applications  of  the  simple  proposition, 
that  when  I  have  already  given  a  thing  (or  a  right)  to  one  person,  I 
cannot  give  it  to  another.  (See  also  p.  229,  sec.  8.) 

f  Sublease  and  underlease  mean  the  same. 


238  Real  Estate. 


paid,  and  if  the  lease  gives  him  the  right  in  such  case  to 
take  the  land,  he  may  do  so,  although  the  subtenants  have 
paid  their  rent  to  their  landlord.  But  to  protect  them- 
selves in  such  case  the  subtenants  may  pay  their  rent  to 
the  original  landlord,  and  that  will  deprive  their  immediate 
landlord  of  the  right  to  sue  them  for  it. 

7.  Distress  for  rent  was  the  forcible  taking  by  the  land- 
lord of  any  personal  property  found  upon   the  land,  in 
order  to  enforce  payment  of  the  rent.     This  proceeding, 
being  so  harsh,  has  been   generally  discontinued,  and   in 
many  of  the  States  the  right  to  take  it  has  been  abolished 
by  law. 

8.  Destruction  of  Property. — Where  there  is  an  express 
agreement  to  pay  rent  the  destruction  of  a  part  of  the  prop- 
erty— as,  for  instance,  by  a  fire  or  flood — does  not  relieve  the 
tenant  from  any  part  of  his  rent.     Having  entire  charge 
of  the  property  he  must  take  the  risk  of  its  destruction. 
Thus,  if  a  house  is  burned  down  the  rent  is  still  due,  for 
the  land  still  remains.*     Neither  the  landlord   nor  the 
tenant  is  obliged  to  rebuild  houses  accidentally  destroyed 
by  fire. 

9.  Repairs. — A  landlord  is  under  no  obligation  to  his 
tenant  to  make  any  repairs  to  the  property  rented,  unless 
he  has  specially  agreed  to  do  so.     Neither  can  the  tenant 
make  the  repairs  and  deduct  the  amount  from  the  rent,  for 
that  is  in  effect  compelling  the  landlord  to  do  it.     On  the 
other  hand  the  tenant  must  deliver  up  the  premises  when 
his  lease  has  expired,  in  as  good  condition  as  that  in  which 
they  were  when  he  received  them,  except  that  he  will  not 
be  chargeable  with  the  ordinary  wear  and  tear.     Therefore 
he  must  make  all  ordinary  repairs,  such  as  the  keeping  of 

*  This  rule  is  harsh  where  the  building  forms  the  principal  part  of 
what  is  rented,  and  is  therefore  changed  to  some  extent  in  some 
States. 


Landlord  and  Tenant.  2?9 

fences  in  order,  replacing  broken  doors  and  windows,  etc. 
But  those  which  cannot  be  called  ordinary,  such  as  the 
supplying  of  a  ne\v  roof,  or  repairs  necessitated  by  an  acci- 
dental fire,  he  need  not  make. 

10.  Improvements. — We  have  seen  that  anything  added 
to  land   becomes  a  part  of  it,  and  belongs  to  its  owner 
(p.  215).     Thus  if  a  tenant  builds  upon  the  land,  or  places 
any  improvements  upon  it  (which  when  finished  are  affixed 
to  the  land,  and  are  not  merely  pieces  of  movable  personal 
property  *),  he  must  leave  them  there,  and  can  be  allowed 
nothing  for  them,  unless  there  was  some  arrangement  to  that 
effect.     Thus  if  he  built  new  buildings  or  fences,  or  made 
repairs,  such  as  the  laying  of  floors,  or  papering  of  walls, 
he  could  not  remove  them  or  obtain  an  allowance  for  them 
without  an  agreement.     But  to  this  rule  there  is  an  excep- 
tion.    A  tenant  may  remove  from  rented  property  articles 
which  he  has  built  upon  it  or  affixed  to  it  if  they  were 
placed  there  for  use  in  some  trade  or  for  domestic  purposes. 
The  first  class  might  include  such  things  as  steam-engines, 
or  other  machines  built  into  the  ground  or  house,  or  even 
buildings  themselves  when  used  for  manufacturing  pur- 
poses.     The  second  class  might  include  such  articles  as 
furnaces,  shelves,  pier-glasses,  gas-fixtures,  etc. 

11.  Notice  to  Quit  is  a  notice  from  the  landlord  to  the 
tenant  that  he  desires  to  end  the  tenancy  at  a  certain  time. 
Where  the  renting  was  for  a  definite  time  no  notice  from 
either  party  to  the  other  is  necessary,  f     The  landlord  has  the 

*  A  tenant  can  of  course  take  away  any  of  his  personal  property. 
In  sec.  10  we  are  speaking  only  of  those  articles  which  are  firmly 
affixed  to  land  or  a  building  in  such  manner  as  ordinarily  to  form  a 
part  of  it. 

f  A  short  notice  to  quit  is,  however,  sometimes  necessary  before  a 
landlord  can  regain  possession  of  leased  premises  by  the  summary 
method  mentioned  in  sec.  13. 


240  Real  Estate. 


immediate  right  to  possession  as  soon  as  the  time  expires. 
The  tenant  also  has  the  right  to  go  then  without  notice. 
It  is  only  when  the  parties  have  not  fixed  a  definite  time 
that  a  notice  is  necessary,  and  its  object  is  to  prevent  either 
party  from  injuring  the  other  by  any  sudden  change.  The 
length  of  the  notice  required  varies  in  different  cases,  being 
very  often  as  long  as  six  months. 

12.  Eviction  means*  a  turning  out,  or  in  other  words  a 
landlord  depriving  his  tenant  of  the  property.      This  he 
has  the  right  to  do  when  the  tenancy  lias  expired,  and  also 
whenever  the  tenant  does,  or  omits  to  do,  anything   for 
which  the  lease  provides  the  landlord  shall  have  the  right 
to  "  re-enter."      To  re-enter  means  to  evict  the   tenant. 
Leases  often  provide  that  he  shall  have  the  right  f  when- 
ever the  tenant  fails  to  pay  any  instalment  of  rent  due, 
though  he  does  not  have  it  for  that  cause  unless  the  lease 
does  so  provide.     If  the  landlord  deprives  the  tenant  of  the 
property  without  right  it  relieves  the  latter  from  paying 
rent.     If  some  third  party,  having  a  better  right  to  the 
property  than  the  landlord,  should  deprive  the  tenant  of  it, 
that  would  also  relieve  him  from  paying  rent.     That  result 
would  occur  if  a  mortgagee,  whose  mortgage  was   given 
before  the  property  was  rented,  should  foreclose.     Any  one 
whose  right,  to  the  land   is  superior  to  that  of  the  landlord 
can,  of  course,  deprive  the  tenant  of  it. 

13.  Recovering  Possession. — When  a  landlord  or  any  one 
else  has  the  right  to  the  possession  of  land,  and  can  take  it 
himself  peaceably,  he  may  do  so.     Thus  when  the  landlord 
has  the  right  to  evict  he  may  do  it  himself  if  he  can  accom- 
plish it  without  force.     But  the  law  does  not  allow  one  to 
use  force  for  the  purpose.     If  the  tenant  or  other  person  in 
possession  refuses   to   leave,    resort   must   be   had  to  the 

*  In  a  popular  sense.  f  But  not  by  force  (see  sec.  13). 


Review  Questions.  241 

courts,  and  in  many  States  there  is  a  speedy  process  by 
which  a  landlord  can  be  put  in  possession  in  a  few  days. 
That  applies  especially  to  the  case  of  a  tenant  failing  to 
pay  his  rent,  or  holding  over  after  the  period  of  the  tenancy 
has  expired. 


REVIEW  QUESTIONS. 

1.  What  is  real  estate?    Personal  property?    To  which  kind  does 

the  stock  of  corporations  belong?  Give  instances  of  property 
changing  from  one  kind  into  the  other.  What  is  the  dis- 
tinguishing difference  between  real  and  personal  property? 

2.  Explain  the  difference  between  full  ownership  and  life  owner- 

ship. Is  there  any  limitation  upon  the  right  of  a  full  owner 
to  do  what  he  pleases  with  his  property?  What  three  limita- 
tions are  there  upon  the  power  of  a  life  owner  over  the  prop- 
erty? Can  he  rent  it?  Which  must  pay  the  taxes  upon  it,  he 
or  the  person  who  is  to  take  it  after  him  ? 

3.  How  may  life  ownership  arise?    What  is  dower? 

4.  Explain  what  is  meant  by  a  future  interest  in  land.     How  does 

it  differ  from  an  expected  interest,  such  as  that  of  an  heir? 
Can  the  present  owner  of  laud  in  which  another  has  a  future 
interest  affect  the  other's  ownership? 

5.  What  is  joint  ownership?     State  some  ways  in  which  it  may 

arise.  Are  a  life  owner  and  the  one  who  is  to  take  the  prop- 
erty on  his  death  joint  owners?  What  are  the  rights  of  joint 
owners  as  to  use  of  the  property?  As  to  its  division? 

6.  What  is  a  trust?     A  trustee? 

7.  Where  laud  is  situated  in  one  State  and  its  owner  lives  in  another, 

by  the  law  of  which  State  are  transactions  with  regard  to  it 
governed?  How  does  that  differ  from  the  ordinary  rule  as 
to  contracts? 


8.  State  the  two  kinds  of  rights  connected  with  the  ownership  of 
real  estate.  What  is  an  appurtenauce?  What  is  included  in 
the  word  "  land  "  besides  the  surface? 


242  Real  Estate. 


9.  What  right  over  the  highway  has  an  adjoining  owner  of  land? 
What  right  has  the  public?  When  a  road  is  abandoned  to 
whom  does  the  land  in  the  road  belong? 

10.  What  rights  has  an  owner  of  land  over  a  stream  flowing  through 

it?    Can  he  diminish  it?    Why?     When  can  he  dam  it? 

11.  What  is  a  right  of  way?     Has  the  owner  of  a  way  the  right  to 

use  it  after  he  has  sold  the  land  to  which  it  leads?  Name 
some  other  rights  analogous  to  right  of  way.  What  is  a  party- 
wall?  What  are  the  rights  of  the  respective  owners?  Name 
some  restrictive  righte. 

12.  Why  is  it  appropriate  to  say  that  certain  land  may  own  rights 

over  other  land? 

13.  Must  the  appurtenances  belonging  to  land  be  described  in  a  deed 

of  it?     Why? 

14.  How  are  rights  over  one's  own  property  obtained?    Rights  over 

other  property?    How  long  do  they  last? 


15.  What  Is  a  deed?    How  different  from  an  agreement  to  sell? 

16.  Can  property  be  granted  by  one  to  another  without  a  deed? 

Why?  Is  an  oral  contract  for  the  future  sale  of  real  estate 
binding? 

17.  State  the  five  essentials  in  the  contents  of  a  deed. 

18.  May  a  deed  be  signed  by  an  agent?    How  may  one  sign  who  does 

not  know  how  to  write?     Who  besides  the  owner  should  sign? 

19.  Is  a  seal  necessary  to  a  deed?     What  is  it?    Who  must  attach  it? 

When? 

20.  At  what  moment  precisely  does  the  transfer  of  ownership  take 

place?  What  effect  has  the  destruction  of  a  deed  before  it  is 
delivered?  After  delivery?  Must  it  be  delivered  to  the  party 
himself? 

21.  What  is  the  acknowledgment  of  a  deed?    Is  it  necessary  to  a 

transfer? 

22.  If  after  a  sale  the  property  turns  out  not  to  have  belonged  to  the 

seller,  in  what  case  can  the  buyer  call  on  him  for  reimburse- 
ment? 

23.  What  is  a  covenant?     State  the  effect  of  the  usual  covenants  in  a 

deed.     State  the  object  of  a  covenant  against  nuisances. 

24.  What  is  a  mortgage  in  effect?    In  form?    How  does  it  differ  in 

effect  from  a  pledge  of  personal  property?    How  in  form  from 


Review  Questions.  243 

a  deed?  Define  mortgagor.  Mortgagee.  After  a  mortgage 
has  been  given  which  party  owns  the  property? 

25.  What  is  a  bond?     Is  it  (when  secured  by  a  mortgage)  personal 

or  real  property?  Is  a  mortgage  valid  without  a  bond  or 
note?  Why? 

26.  State  the  essential  contents  of  a  mortgage.     Must  it  be  in  writing? 

27.  What  is  foreclosure?    The  most  common  method?     State  the 

circumstances  under  which  the  bond  and  mortgage  in  forms 
40  and  41  might  be  foreclosed.  What  is  the  effect  of  foreclos- 
ing as  to  ownership  of  the  property?  As  to  payment  of  the 
debt? 

28.  May  mortgaged  property  be  sold?     What  is  its  effect  upon  the 

mortgage? 

29.  May  a  mortgage  be  sold? 

30.  In  what  case  does  one  buying  mortgaged  property  become  re- 

sponsible for  the  debt,  and  in  what  case  not?  When  is  it  of 
importance,  and  when  not?  Why? 

31.  What  other  liens  may  there  be  on  real  estate?     The  difference 

between  a  lien  on  personal  property,  and  one  on  real  estate? 

32.  In  what  order  do  liens  upon  the  same  property  take  precedence 

of  each  other?    What  exception  is  there  to  that  rule? 

33.  What  is  the  effect  upon  a  first  mortgage  of  a  second  mortgagee's 

foreclosing? 

34.  What  is  "searching  a  title?"     Its  object? 

35.  What  is  it  to  record  a  deed?    Is  it  legally  recorded  until  fully 

copied?  Is  record  necessary  to  a  transfer?  What  instruments 
should  be  recorded  ? 

36.  What  is  the  object  of  recording? 

37.  What  is  the  effect  of  not  recording  an  instrument?     May  the 

one  who  gave  it  claim  it  is  void  if  unrecorded?  May  his 
heirs?  Why?  Who  may?  Why? 

38.  To  whose  interest  is  it  to  see  that  the  record  is  made?    Why? 

39.  If  a  second  mortgagee  takes  his  mortgage  knowing  that  there  is 

one  prior  to  his  but  unrecorded,  which  takes  precedence? 
Why?  State  the  rule. 

40.  Name  one  thing  necessary  to  the  right  to  record,  besides  a  signed 

instrument.  If  a  deed  is  recorded  without  it,  is  the  record 
good?  What  may  take  its  place  in  some  States? 


244  Real  Estate. 


41.  What  is  a  landlord?     A  tenant?    Renting?    Rent?    A  lease? 

42.  May  a  tenancy  for  a  definite  period  be  terminated  by  one  party 

without  the  other's  consent?     May  it  by  agreement? 

43.  In  what  case  must  a  lease  be  written?     Must  it  have  a  seal? 

44  What  circumstances  regulate  the  time  when  rent  is  to  be  paid? 
If  the  provisions  of  a  lease  differ  from  the  custom  of  the 
neighborhood,  which  controls?  When  is  rent  due  in  advance? 

45.  What  is  the  effect  upon  a  tenant's  rights  of  a  sale  of  the  property? 

The  effect  upon  his  rights  of  the  foreclosure  of  a  mortgage 
which  was  made  before  his  lease?  The  effect,  if  his  lease  was 
made  first?  Why,  in  each  case? 

46.  May  a  tenant  lease  the  property  to  others?    What  is  a  sublease? 

An  assignment  of  a  lease?  Is  a  subtenant  responsible  for  rent 
to  the  original  landlord?  Is  one  to  whom  a  lease  is  assigned? 

47.  What  is  distress  for  rent?     Is  it  generally  resorted  to  in  this 

country? 

48.  Does  a  destruction  of  a  part  of  the  property  relieve  a  tenant  from 

paying  any  of  the  rent?    Why? 

49.  Which  party  is  under  obligation  to  make  ordinary  repairs  to 

rented  property,  the  landlord  or  the  tenant?  Can  a  tenant 
make  repairs,  and  deduct  it  from  the  rent?  Is  a  tenant 
obliged  to  make  extraordinary  repairs? 

50.  If  a  tenant  makes  improvements  to  property  is  he  entitled  to 

allowance  for  them?  Can  he  in  general  remove  buildings  he 
has  built?  Can  lie  remove  articles  of  his  own  not  fastened  to 
the  land  or  building? 

51.  What  two  kinds  of  articles  may  a  tenant  remove,  though  in  a 

sense  they  are  part  of  the  land  or  building? 

52.  In  what  case  is  it  necessary  for  a  landlord  to  give  notice  to  quit 

to  a  tenant? 

53.  What  is  eviction?    When  has  a  landlord  the  right?    How  is  it 

exercised?  May  a  landlord  ever  evict  a  tenant  by  force? 
Has  a  landlord  always  the  right  to  the  possession  of  the  land 
if  the  tenant  fails  to  pay  any  instalment  of  rent  due? 


EXERCISES 

m  THE 

DBA  WING  OF  PAPEES. 


THE  purpose  of  the  following  exercises  is  to  aid  ui 
familiarizing  the  scholar  with  the  forms  of  some  of  (he 
more  common  business  papers  and  contracts,  by  requiring 
him,  on  a  statement  of  certain  hypothetical  facts,  to  draw 
up  the  paper  appropriate  to  the  case.  The  cases  would 
thus  be  presented  to  him  just  as  they  might  arise  in  real 
life.  The  exercises  given  will  serve  merely  as  examples  or 
suggestions,  which  may  be  amplified  or  multiplied  accord- 
ing to  the  ideas  of  the  individual  teacher. 

In  those  papers  which  have  no  established  invariable 
form  there  will  be  room  for  choice  in  the  use  of  language. 
But  let  the  pupil  remember  that  in  legal  papers  the  one 
great  object  to  be  striven  for  is  clearness.  Let  the  full 
meaning  be  expressed,  and  in  such  terms  as  to  provide 
as  far  as  possible  against  all  future  differences  of  opinion. 
It  is  better  to  make  a  long  clear  paper  than  a  short  am- 
biguous one.  Common  words  also  should  be  used,  those 
which  will  most  naturally  express  the  idea.  It  is  a  rule  of 
law  that  in  all  contracts  the  words  are  to  be  interpreted  in 
their  ordinary  signification.  They  do  not  have  one  mean- 
ing popularly  and  another  legally. 


246  Drawing  of  Papers. 


COMMERCIAL  PAPER. 

I.  NOTE. 

On  September  18th,  1883,  Samuel  S.  Hoyle  lends  $500 
to  Franklin  Grant,  the  loan  to  be  paid  in  six  months,  with 
interest  at  six  per  cent,  the  borrower  agreeing  to  give  his 
note  for  it. 

Draw  the  note  in  the  following  different  ivays: 

1.  Make  it  payable  to  the  order  of  the  creditor  ; 

2.  Make  it  payable  to  bearer  ; 

3.  Make  it  payable,  to  the  maker's  order,  with  his  indorse- 
ment to  the  order  of  the  creditor  ; 

4.  Draw  one  that  will  not  be  negotiable. 

II.  NOTE. 

On  April  5th,  1884,  the  firm  of  John  Livingston  & 
Company  buy  of  the  firm  of  Martin  Spinney's  Sons 
$652  worth  of  dry  goods  on  credit,  $200  to  be  paid  in  two 
months,  $200  in  three  months,  and  the  balance  in  four 
months,  without  interest. 

1.  Draw  three  notes  to  represent  those  three  payments  to 
be  made,  making  each  one  payable  to  order  and  negoti- 
able. 

2.  Draw  the  third  note  in  such  a  tvay  as  to  give  Living- 
ston &  Co.  the  right  to  pay  it,  either  in  money  or,  if 
they  choose,  by  returning  to  Martin  Spinney's  Sons  an 
equal  amount  of  the  goods  bought  at  the  prices  at  which 
they  are  bought. 

III.  NOTE. 

Addison  Howland  is  indebted  to  B.  K.  Curran  &  Co.  in 
the  sum  of  $52.75.  Not  being  able  to  pay  it  at  the  time, 


Drawing  of  Papers.  247 

they  ask  him  on  January  4th,  1886,  for  his  note  payable  to 
their  order  on  demand. 
Draw  the  note. 

IV.  NOTE. 

On  September  10th,  1885,  Charles  H.  Laudon  asks 
Charles  K.  Page  to  lend  him  $300  for  a  month.  Page  is 
willing  to  do  so,  but  cannot  conveniently  get  the  money 
just  then.  However,  knowing  that  he  will  have  the  money 
at  the  North  Western  Bank  in  a  month,  he  offers  to  give 
Laudon  his  note  for  the  amount,  due  in  one  month,  which 
Laudon  may  get  discounted  or  use  as  he  wishes. 

1.  Draw  the  note,  payable  at  the  North  Western  Bank. 

2.  Draw  Laudon' s  note,  payable  to  Page's  order,  due  in 
one  month,  to  represent  the  loan  from  Page  to  him. 

V.  DRAFT. 

Packard  &  Company,  of  Milwaukee,  "Wis.,  make  a  draft 
June  25th,  1885,  on  the  Merchants'  Union  Bank  of  Hart- 
ford, Conn.,  for  $1500,  in  favor  of  Robert  P.  Field,  pay- 
able on  presentation. 

Draw  the  draft. 

VL  DBAFT. 

Pease  &  Ashley,  of  Rochester,  bought  of  A.  R.  Kim- 
ball,  of  New  York,  $4500  worth  of  goods  on  July  7th, 
1884,  on  a  credit  of  six  months.  At  the  time  the  bill 
becomes  due  Kimball  makes  a  draft  on  them  payable  to 
his  own  order,  thirty  days  after  sight. 

Draw  the  draft. 

VII.  BILL  OF  EXCHANGE. 

Henry  0.  Jewell,  of  Brooklyn,  N.  Y.,  owes  B.  T.  Hobbs, 
of  London,  England,  $3000.  Wishing  to  pay  the  debt,  he 


248  Drawing  of  Papers. 

buys  of  Yeoman  &  Young,  bankers,  of  New  York,  a  bill 
of  exchange  drawn  by  them  upon  the  International  Bank, 
of  London,  payable  to  the  order  of  B.  T,  Hobbs,  and  to  be 
paid  as  soon  as  presented. 
Draw  the  bill  of  exchange. 

VIII.  ACCEPTANCE. 
Take  the  case  stated  in  Exercise  VI. 
Draw  the  draft  as  it  will  be  after  it  has  been  presented  to 
the  persons  draivn  upon  and  accepted  by  them. 

IX.  CHECK. 

Arthur  K.  Archer,  living  in  Boston,  Mass.,  wishes  to 
send  $29.40  to  0.  P.  Martin,  who  lives  in  Galveston,  Texas. 
He  does  it  by  sending  a  check  for  that  amount  upon  the 
Bay  National  Bank,  dated  August  14th,  1584. 

1.  Draw  the  check  in  such  a  way  that  it  can  safely  be 
sent  by  mail. 

2.  Draw  it  in  a  number  of  ways  which  would  be  unsafe, 
were  it  to  be  sent  by  mail. 

X.  CERTIFIED  CHECK. 
Take  the  same  case. 
Draw  the  check  as  it  would  be  when  certified. 

XI.  INDORSEMENT. 

Take  anyone  of  the  notes  drawn  under  Exercise  II.,  and 
suppose  that  the  firm  to  whose  order  it  is  drawn,  instead  of 
keeping  it  until  it  is  due,  get  it  discounted  at  the  Eighth 
National  Bank,  indorsing  it  themselves. 

1.  Place  the  proper  indorsement  upon  it  to  make  them 
responsible  upon  it,  and  to  keep  it  still  payable  to  order. 

2.  Place  the  proper  indorsement  upon  it  to  make  them 
responsible,  but  to  render  it  payable  to  any  one. 


Drawing  of  Papers.  249 


XII.  INDORSEMENT. 

Take  the  note  drawn  under  Exercise  IV.,  No.  1:  suppose 
that  the  payee  sells  it  to  Christian  Sackett,  indorsing  it  so 
as  to  make  himself  responsible,  and  so  as  to  make  the  note 
payable  to  any  one;  that  Sackett  sells  it  to  Joseph  J.  Hub- 
bard  &  Co.,  indorsing  to  make  himself  responsible;  and 
that  Joseph  J.  Hubbard  &  Co.  sell  it  to  the  Ninth  National 
Bunk  without  guaranteeing  it;  and  that  the  bank  collects 
it  when  due. 

Draw  the  note  with  the  proper  indorsements  as  it  will 
appear  ivhen  due. 

XIII.  INDORSEMENT. 

Take  the  note  drawn  under  Exercise  IV.,  No.  2,  and 
make  the  same  suppositions  as  in  Exercise  XII.,  except  that 
Joseph  J.  Hubbard  &  Co.  make  themselves  responsible 
upon  it 

Draw  it  with  the  indorsements  as  it  will  appear  when 
due. 

XIV.  INDORSEMENT. 

Take  the  draft  drawn  under  Exercise  V. ;  suppose  that 
the  person  in  whose  favor  it  is  drawn  transfers  it  to  Thomas 
Dumont,  making  it  payable  to  Dumont's  order,  but  re- 
lieving himself  from  responsibility,  and  that  Dumont  trans- 
fers it  to  D.  P.  Marion  without  guaranteeing  it,  but 
making  it  payable  to  anyone. 

Draw  it  with  the  indorsements. 

XV.  INDORSEMENT. 

Suppose  that  Samuel  Jones  draws  a  check  upon  the  Bank 
of  the  United  States  for  $725.18,  in  order  to  pay  a  bill  of 


250  Drawing  of  Papers. 

that  amount  which  he  owes  to  Abraham  Jones;  that  he 
draws  it  to  his  own  order  and  gives  it  to  Abraham  Jones; 
that  Abraham  Jones  transfers  it  to  John  Jones;  John 
Jones  to  William  Jones;  William  Jones  to  Charles  Jones; 
Charles  Jones  to  Amos  Jones,  who  collects  it  at  the  bank; 
that  each  one  indorses  it  in  full,  except  the  last,  who  in- 
dorses in  blank;  and  that  all  indorse  so  as  to  make  them- 
selves responsible,  except  Charles  Jones. 
Draw  the  check  with  its  indorsements. 


Drawing  of  Papers.  251 


MISCELLANEOUS  PAPEES. 

XVI.  RECEIPT. 

Mrs.  E.  A.  Scott  owes  William  B.  Waters  &  Son  $524. 
On  January  17th,  1881,  she  pays  $100,  on  February  6th, 
1881,  $250,  and  the  remainder  on  February  8th,  1882. 

Draw  three  receipts  to  represent  the  three  payments. 

XVII.  GUARANTY. 

Take  one  of  the  notes  drawn  under  Exercise  II. 
Draw  on  Us  back  a  guaranty  of  its  payment  by  George 
K.  H.  Inness. 

XVIII.  NOTICE  TO  INDORSEES. 

Take  each  one  of  the  papers  with  its  indorsements,  drawn 
under  Exercises  XL,  XII.,  XIII.,  XIV.,  and  XV.,  and  sup- 
pose that  in  each  case  the  paper  was  not  paid  at  maturity. 

1.  Draw  in  each  case  a  proper  notice  to  be  sent  to  the  in- 
dorsers. 

2.  Draw  a  draft  which  had  been  transferred  and  indorsed 
before  it  was  presented  for  acceptance,  and  on  which 
acceptance  has  been  refused,  and  then  draw  a  proper 
notice  of  non-acceptance  to  be  sent  to  the  indorsers.      „ 

XIX.  MEMORANDUM   OF  SALE 

A.  Robert  Wolf,  sells  on  July  23d,  1883,  to  Robinson 
&  Company,  1000  tons  of  coal,  at  $3.50  a  ton,  payment  to 
be  made  in  three  months. 

1.  Draw  a  memorandum  of  the  sale,  signed,  sufficient  to 
make  it  binding. 


Drawing  of  Papers. 


2.  Suppose  that  instead  of  a  sale  on  July  23d,  1883, 
it  was  an  agreement  made  on  that  day,  to  sell  that 
amount,  at  that  price,  any  time  within  six  months: 
draw  that. 

XX.  CONTRACT  OF  EMPLOYMENT. 

On  March  19th,  1884,  the  firm  of  Mason  &  Mattling, 
employ  Job  B.  Bellows  as  a  bookkeeper  for  one  year,  com- 
mencing April  1st.  They  agree  to  pay  him  $1500  for  the 
year,  payments  to  be  made  on  the  last  day  of  each  month. 
They  also  agree  that  if  Bellows  during  the  year  is  offered 
any  other  situation  by  anyone,  and  wishes  to  leave,  he  shall 
be  at  liberty  to  do  so,  and  his  salary  shall  be  paid  him  up 
to  the  time  he  leaves.  The  parties  also  agree  that  if  before 
the  end  of  the  year  the  firm  should  be  dissolved  in  any 
way,  or  Bellows  should  die,  then  the  employment  should 
terminate. 

Draw  the  agreement  so  as  to  be  binding  upon  both  parties. 

XXI.  CONTRACT  OF  PARTNERSHIP. 

Stephen  Mills,  Ezekiel  B.  Warren,  and  Alonzo  C.  Car- 
man enter  into  partnership  August  8th,  1875,  upon  the 
following  terms: 

1.  Mills  contributes  $5000  to  the  capital,  Warren  $3000, 
and  Carman  agrees,  as  his  share,  to  allow  the  firm  the  use 
of  the  building  345  Wall  Street,  rent  free; 

2.  The  firm  name  is  to  be  Mills,  Warren  &  Co.; 

3.  The  business  is  to  be  the  manufacture  and  selling  of 
paper; 

4.  Mills  is  to  devote  himself  solely  to  the  manufacturing 
branch  of  the  business,  and  the  other  partners  are  to  take 
charge  of  every  other  department; 

5.  All  the  partners  are  to  devote  all  their  time  to  the 
business; 


Drawing  of  Papers.  253 

6.  The  partnership  is  to  continue  three  years; 

7.  The  profits  are  to  be  divided  in  the  following  pro- 
portions: to  Mills  one- third,  to  Warren  one-fifth,  and  to 
Carman  seven-fifteenths; 

8.  The  losses  are  to  be  borne  in  the  same  proportions; 

9.  No  partner  is  to  draw  from  the  firm  more  than  $1500 
the  first  year. 

Draw  articles  of  copartnership  embodying  those  con- 
ditions. 

XXII.  NOTICE  OF  INSURANCE  Loss. 

Take  the  case  supposed  in  form  25  (p.  289),  and  suppose 
that  on  the  14th  day  of  December,  1874,  a  fire  occurs  de- 
stroying a  large  number  of  books. 

Draw  a  proper  notification  to  the  Insurance  Company. 

XXIII.  POWER  OF  ATTORNEY. 

Andrew  P.  Wilson  owns  245  shares  of  the  American 
East  Coast  Improvement  Company.  He  wishes  to  give 
Stephen  W.  Mack,  of  Ottawa,  Canada,  a  written  paper 
showing  that  the  latter  is  authorized  to  sell  and  transfer 
the  stock  to  any  one  as  his  agent. 

Draw  the  power  of  attorney. 

XXIV.  BROKER'S  NOTES. 

Take  the  case  stated  in  Exercise  XIX.,  and  suppose  that 
instead  of  the  sale  being  made  by  the  parties  themselves  it 
is  made  through  the  firm  of  C.  B.  Eice  &  Carberry  as 
brokers. 

Draw  tioo  notes,  for  the  brokers  to  send  to  the  buyer  and 
seller  respectively. 


254  Drawing  of  Papers. 


XXV.     DISSOLUTION  OF  PARTNERSHIP. 

Take  the  case  stated  in  Exercise  XXI.,  and  suppose  that 
after  the  business  has  been  carried  on  for  three  years  War- 
ren desires  to  withdraw  from  the  firm,  and  that  the  other 
two  partners,  wishing  to  continue  the  business,  are  willing 
to  pay  him,  and  he  is  willing  to  receive,  $4000  for  his  inter- 
est, to  be  paid  as  follows  :  $2000  immediately,  $1000  at  the 
end  of  another  year,  and  $1000  at  the  end  of  two  years,  the 
two  remaining  partners  to  agree  to  assume  all  the  debts  of 
the  firm. 

1.  Draw  such  a  contract  to  be  signed  by  all  three  of  the 
partners. 

2.  Draw  such  a  notice  as  Warren  ought  to  send  to  those 
who  have  dealt  with  the  firm,  and  such  a  notice  as  he 
ought  to  publish,  in  order  that  lie  may  not  be  made  re- 
sponsible for  future  debts  of  the  firm. 

3.  Draw  a  short  contract  of  partnership  for  the  two  re- 
maining partners,  by  which  they  agree  to  carry  on  the 
business  on  the  same  terms  as  before  for  five  years 
longer,  except  that  each  is  to  receive  half  the  profits 
and  bear  half  the  losses. 


A  TABLE  or  DEFINITIONS.* 


Abandonment.  —See  under  Insurance. 
Acceptance  (of  a  draft). — Two  meanings: 

1.  The  agreeing  of  the  person  drawn  upon  to  pay  it. 

2.  The  draft  after  it  has  been  accepted. 

Acceptor  (of  a  draft). — See  under  Parties  to  Commercial  Paper. 

Accommodation  Paper. — Commercial  paper  for  which  no  considera- 
tion exists  as  between  the  original  parties. 
BUSINESS  PAPER. — Commercial  paper  for  which  there  is  a  con- 
sideration given  when  it  originates. 
ACCOMMODATION  DRAFT. — Two  kinds:- 

1.  One  in  which  there  is  no  consideration  for  the  drawing  (i.e., 
for  the  drawer's  agreement);  therefore,  one  by  which  the 
drawer  accommodates  the  payee. 

2.  One  in  which  there  is  no  consideration  for  the  accepting 
(i.e.,  for  the  acceptor's  agreement);  therefore  one  by  which 
the  acceptor  accommodates  the  drawer. 

ACCOMMODATION  INDORSEMENT. — One  for  which  the  indorse r 

receives  no  consideration. 

ACCOMMODATION  NOTE. — One  in  which  there  is  no  considera- 
tion for  the  making  (i.e.,  for  the  maker's  agreement);  there- 
fore one  by  which  the  maker  accommodates  the  payee. 
Acknowledgment  (of  deeds,  etc.). — The  signer's  going  before  a  certain 
officer  and  acknowledging  to  him  that  the  deed  is  freely  and  vol- 
untarily given,  and  the  officer's  attaching  his  certificate  that  the 
signer  has  done  so.     The  word  is  sometimes  used  to  mean  the 
signer's  act  alone,  or  the  officer's  certificate  alone. 

*  It  is  not  intended  in  this  table  to  give  a  list  of  words  in  legal  use, 
but  only  the  exact  meaning  of  many  words  in  common  use.  Those 
relating  to  the  same  general  subject  are  grouped  together,  with 
cross-references,  so  that  words  with  contrasted  meanings  may  be 
compared. 


256  Definitions. 


Advances  (made  by  a  commission  merchant). — Money  paid  by  a  com- 
mission merchant  to  his  principal,  before  any  sale  of  the  goods, 
as  a  part  of  what  they  will  probably  sell  for. 

Agency. — The  relation  existing  between  two  parties  by  which  one 
(called  the  agent),  is  authorized  to  do   certain  acts  for  the  other 
(called  the  principal),  with  other  parties. 
PRINCIPAL. — A  party  for   whom  another  is  authorized  to  do 

certain  acts  with  third  parties. 
AGENT. — A  party  authorized  to  do  certain  acts  for  another,  with 

third  parties. 

THIRD  PARTY. — A  party  with  whom  an  agent  does  certain  au- 
thorized acts  for  his  principal. 
AUTHORITY. — The  power  granted  by  a  principal  to  his  agent  to 

do  certain  acts  for  him  with  other  parties. 
APPARENT  AUTHORITY. — The  power  which  a  principal  has  al- 
lowed his  agent  to  seem  to  have,  to  act  for  him. 
SUB- AGENT. — The  agent  of  an  agent. 
ATTORNEY. — In  one  meaning   another  word  for  agent.      Used 

chiefly  in  connection  with  important  matters. 
POWER  OP  ATTORNEY. — A  written  instrument  by  which  a  prin- 
cipal grants  to  the  agent  authority  to  act  for  him  with  others. 
Agent — See  under  Agency. 
Agreement  to  Sell. — See  under  Sale. 
Apparent  Authority. — See  under  Agency. 

Appurtenance  (to  real  estate). — A  minor  article  or  right  connected  with 
the  property,  and  passing  with  it  from  one  owner  to  another. 

Articles  of  Association.      )  ., 

..  ,       ,,  <•  See  under  (Corporation. 

Articles  of  Incorporation.  } 

Articles  of  Copartnership. — See  under  Partnership. 

Assignee  (in  insolvency). — See  under  Bankruptcy. 

Assignment,  General. — See  under  Bankruptcy. 

Assignment  (of  a  claim). — The  transfer  of  its  ownership  by  one  per- 
son to  another.  It  is  generally  used  of  a  written  transfer,  and 
in  connection  with  claims  not  founded  on  commercial  paper. 

Assignment  of  a  Lease. — See  under  Lease. 

Assure. — Means  the  same  as  Insure. 

Attorney. — Two  meanings: 

1.  A  lawyer. 

2.  An  agent.     See  under  Agency. 
Authority. — See  under  Agency. 


Definitions.  257 


Average  (in  insurance). — See  under  Insurance. 
Bank  Bill. — See  under  Money. 
Bank  Note. — Means  the  same  as  Sank  Bill. 

Bankruptcy. — The  condition  of  one  who  is  unable  to  pay  his  debts  as 
they  fall  due. 
FAIL. — To  become  unable  to  pay  one's  debts  as  they  become 

due.    Used  only  of  persons  iu  commercial  life. 
GENERAL  ASSIGNMENT. — A  transfer  by  a  failing  debtor  of  all 
his  remaining  property  to  some  one  for  the  purpose  of  having 
it  distributed  among  his  creditors. 

ASSIGNEE  (in  a  general  assignment). — The  person  to  whom  the 
failing  debtor  transfers  all  his  remaining  property  for  the  pur- 
pose of  having  it  distributed  among  his  creditors. 
PREFERENCE  (in  a  general  assignment). — A  direction  that  cer- 
tain ones  of  the  creditors  shall  be  paid  their  entire  claims, 
though  nothing  is  left  for  the  rest. 

COMPROMISE. — An  agreement  between  a  debtor  and  his  credi- 
itors  by  which  they  agree  to  accept  a  certain  proportion  of 
the  amounts  due,  and  discharge  him  from  the  remainder. 
Barter. — See  under  Sale. 
Bill  and  Note  Broker. — See  under  Broker. 
Bill  of  Exchange. — See  under  Commercial  Paper. 
Bill  of  Lading. — A  document  delivered  by  a  carrier  to  one  sending 
goods  by  him,  acknowledging  that  they  have  been    received 
by  him  for  transportation  to  a  certain  place.     It  is  both  a  re- 
ceipt and  a  contract. 

Blank  Indorsement.— See  under  Indorsement. 

Bond. — A  written  instrument  by  which  one  agrees  to  pay  to  another 
a  certain  amount  of  money,  unless  something  else  specified 
therein  is  done. 

BOND  (for  the  payment  of  money). — A  written  instrument  by 
which  one  agrees  to  pay  to  another  a  certain  amount  of 
money,  unless  a  certain  smaller  amount  is  paid.  It  is  in  effect 
an  agreement  to  pay  the  smaller  amount. 

BOND  OF  INDEMNITY. — An  agreement  in  the  form  of  a  bond  by 
which  one  agrees  to  indemnify  another  for  all  loss  in  a  certain 
matter. 
Broker. — An  agent  to  make  contracts. 

BILL  AND  NOTE  BROKER. — One  who  acts  for  others  in  the  buy- 
ing and  selling  of  commercial  paper. 


258  Definitions. 


INSURANCE  BROKER. — One  who  acts  for  the  owners  of  property 

in  obtaining  insurance  upon  it. 

MERCHANDISE  BROKER. — One  who  acts  for  others  in  the  buying 
and  selling  of  merchandise  without  having  it  in  his  posses- 
sion.    See  Commission  Merchant. 
REAL  ESTATE  BROKER. — One  who  acts  for  others  in  the  buying, 

selling,  mortgaging  and  renting  of  real  estate. 
SHIP  BROKER. — One  who  acts  for  others  in  the  buying,  selling, 

and  freighting  *  of  vessels. 

STOCK  BROKER. — One  who  acts  for  others  in  the  buying  and  sell- 
ing of  the  stocks  and  bonds  of  railroads  and  other  corporations. 
Business  Paper. — See  under  Accommodation  Paper. 
Capital  (of  a  corporation). — See  under  Corporation. 
Capital  (of  a  firm). — See  under  Partnership. 
Capital  Stock. — See  under  Corporation. 

Carrier. — One  who  transports    the   goods  of  others,  or  transports 
passengers,  from  one  place  to  another. 

COMMON  CARRIER. — One  engaged  in  the  business  of  transport- 
ing from  place  to  place  goods  or  passengers  for  the  public  gen 
erally. 
PRIVATE  CARRIER. — One  who  transports  goods  or  passengers, 

but  only  casually,  or  only  for  particular  persons. 
Certificate  of  Deposit. — See  under  Commercial  Paper. 
Certificate  of  Stock. — See  under  Corporation. 
Certification  (of  check) : 

1.  Inform:    The  signature  of  the  proper  officer  of  the  bank 
written  across  its  face,  sometimes  with  and  sometimes  with- 
out the  word  "certified,"  or  "good." 

2.  In  legal  intent:  A  recognition  of  the  check  by  the  bank  as 
good  in  two  particulars,  viz.,  (1)  that  the  drawer's  signature  is 
genuine,   and  (2)  that  he  has  that  amount  of  money  in  the 
bank. 

Charter  (of  corporation). — See  under  Corporation. 
Charter  (a  vessel). — To  hire  or  let  a  vessel  or  a  part  of  it. 
Charter-Party. — The  written   instrument  by  which  the  owner  of  a 
vessel  lets  it,  or  a  part  of  it,  to  another. 

*  Obtaining  goods  to  be  transported  upon  a  vessel,  or  taking  charge 
of  a  vessel  and  her  cargo  when  she  arrives  at  a  certain  port. 


Definitions.  259 


Chattel. — A  piece  of  personal  property.     Chattel  includes  not  only 

merchandise,  but  also  animals,  and  leases  of  real  estate. 
Chattel  Mortgage. — A.  conditional  sale  of  personal  property,  i.e.,  one 
which  is  to  become  void  if  a  certain  thing  happens.     Chiefly 
used  as  a  security  for  the  payment  of  money.     See  also  Pledge. 
Check. — See  under  Commercial  Paper, 
Civil  Remedy. — See  under  Remedy. 
Coin. — See  under  Money. 
Collateral. — See  under  Pledge. 

Commercial  Paper. — Written  evidences  of  indebtedness  in  common 
use  among  merchants. 

NOTE. — A  written  promise,  signed  by  the  person  promising,  to 
pay  a  certain  sum  of  money  at  a  certain  time  to  a  person 
named,  or  to  his  order,  or  to  the  bearer. 

DRAFT. — A  written  order,  signed  by  one  person,  ordering  another 
person,  to  whom  it  is  directed,  to  pay  a  certain  sum  of  money 
at  a  certain  time  to  a  third  person  (named),  or  to  his  order,  or 
to  the  bearer. 
BILL  OP  EXCHANGE. — Two  meanings: 

1.  A  draft  of  which  the  drawer  and  the  person  drawn  upon 
live  in  different  countries. 

2.  Another  term  for  a  draft  of  any  kind. 

CHECK. — A  written  order  signed  by  one  person,  ordering  a  cer- 
tain bank  or  banker,  to  whom  it  is  directed,  to  pay  a  certain 
sum  of  money  immediately  to  a  third  person  (named),  or  to  his 
order,  or  to  the  bearer. 

CERTIFICATE  OF  DEPOSIT. — A  certificate  issued  by  a  bank  or 
banker,  showing  that  a  certain  sum  of  money  has  been  depos- 
ited there,  payable  to  a  certain  person,  or  to  his  order,  or  to 
the  bearer. 
Commission. — A  percentage  allowed  to  one  in  payment  for  certain 

services. 
Commission  Merchant. — One  employed  by  others  to   sell  for  them 

merchandise  which  they  send  to  him. 
Common  Carrier. — See  under  Carrier. 
Common  Law. — See  under  Law. 
Company. — Two  meanings: 

1.  A  corporation.     See  Corporation. 

2.  A  term  often  used  in  a  firm  name  to  designate  the  partners 
who  are  not  otherwise  named  therein. 


260  Definitions. 


Compromise. — See  under  Bankruptcy. 
Conditional  Sale. — See  under  Sale. 

Consideration  (for  a  contract).  — The  thing  given,  done,  or  promised 

to  be  given  or  done  by  the  person  to  whom  the  promise  is  made. 

Consignee. — One  to  whom  merchandise,  given  to  a  carrier  by  another 

person  for  transportation,  is  directed. 

Consignor. — One  who  gives  merchandise  to  a  carrier  for  transporta- 
tion to  another. 
Constitution. — See  under  Law. 

Contract. — An  agreement  made  between  two    or  more    parties;    a 
promise  assented  to. 
EXPRESS    CONTRACT. — An    agreement  definitely  expressed  in 

words.     It  may  be  oral  or  written. 
IMPLIED  CONTRACT. — An  agreement  which  is  implied  from  all 

the  circumstances  of  the  transaction. 
Copartnership. — Another  word  for  Partnership. 
Copyright. — The  right  granted  by  the  government  to  an  author,  to 
prevent  all  others  from  printing  or  selling  his  work  without  his 
consent,  within  the  country,  for  a  certain  number  of  years. 
Corporation. — A  number  of  persons  associated  together  by  law  for  a 
particular  purpose,  as  a  new  and  distinct  individual. 
CAPITAL  STOCK. — The  fund  or  property,  as  a  whole,  contrib- 
uted or  supposed  to  have  been  contributed  to  a  corporation  at 
its  organization,  as  its  property. 
CAPITAL. — Another  term  for  Capital  Stock. 
STOCK. — Another  term  for  Capital  Stock.     It  is  also  used  to  de- 
note the  shares  into  which  the  capital  stock  is  divided,  as 
where  one  is  said  to  own  so  much  stock,  meaning  so  many 
shares. 

CERTIFICATE  OP  STOCK. — A  certificate  given  by  the  proper  offi- 
cers of  a  corporation  showing  that  a  certain  person  owns  a 
certain  number  of  shares  of  the  capital  stock. 
PAR  VALUE. — A  nominal  value  placed  upon  the  stock  of  a  cor- 
poration by  its  organizers  at  its  organization. 
STOCKHOLDER. — The  owner  of  one  or  more  shares  of  the  stock 

of  a  corporation. 

SHAREHOLDER. — Another  term  for  Stockholder. 
ARTICLES  OP  ASSOCIATION,  or  i 

ARTICLES  OF  INCORPORATION,  f  A  paper  signed  by  the  organiz- 
ers of  a  corporation,  preliminary  to  its  organization,  setting 


Definitions.  261 


forth  its  name,  purposes  and  plan,  and  forming  the  basis  of 
the  corporation. 
CHARTER. — A  special  act  of  a  legislature  creating  a  particular 

corporation. 

RECEIVER. — A  person  appointed  to  take  the  property  of  a  cor- 
poration on  its  dissolution,  and  to  distribute  it  according  to  law. 

Covenant  (in  a  deed). — An  agreement  contained  in  a  deed,  additional 
to  those  parts  which  transfer  the  ownership. 

Credit,  Sale  on. — A  sale  in  which  the  payment  is  to  be  made  at  some 
future  time. 

Criminal  Kemedy. — See  under  Remedy. 

Currency.— See  under  Money. 

Damages. — See  uuder  Remedy. 

Days  of  Grace. — Three  days  to  be  added  to  the  time  specified  in  a 
note  or  draft,  at  which  it  is  to  become  due. 

Deed  (of  real  estate). — A  written  instrument  transferring  the  owner- 
ship of  real  estate  from  one  person  to  another. 

Demand  Note. — A  note  made  payable  by  its  terms  on  demand,  or  one 
in  which  no  time  of  payment  is  specified. 

Deposit  (in  banking). — To  place  money  with  the  bank  with  the  agree- 
ment that  it  or  any  part  of  it  shall  be  repaid  when  called  for. 

Deviation. — See  under  Insurance. 

Discount  (of  commercial  paper). — To  buy  a  note  or  draft  before  it  is 
due,  with  the  indorsement  of  the  one  from  whom  it  is  bought, 
paying  its  amount  less  a  certain  amount  of  interest. 

Dishonor  (of  commercial  paper). — A  failure  to  pay  it  when  due.  Or, 
in  a  draft,  a  failure  to  accept  it  when  presented  for  acceptance. 

Distress  for  Rent. — The  taking  by  a  landlord  of  personal  property 
found  upon  the  land,  for  the  payment  of  rent  due. 

Dower. — The  right  of  a  widow  to  a  life  interest  in  one-third  of  all 
the  real  estate  owned  by  her  husband  at  any  time  during  their 
marriage. 

Draft. — See  under  Commercial  Paper. 

Drawer  (of  check  or  draft). — See  under  Parties  to  Commercial  Pa- 
per. 

Earn  (a  premium). — See  under  Insurance. 

Endorse. — Another  word  for  Indorse. 

Eviction  (of  a  tenant). — Depriving  him  of  the  possession  of  the  land. 

Exchange.  A  collective  term  denoting  drafts  or  bills  of  exchange 
upon  parties  in  another  State  or  country. 


262  Definitions. 


Execution. — See  under  Remedy. 

Express  Contract. — See  under  Contract. 

Factor. — Another  term  for  Commission  Merchant. 

Fail. — See  under  Bankruptcy. 

Fee-simple. — The  full  absolute  ownership  of  real  estate. 

Fire  Insurance. — See  under  Insurance. 

Firm. — See  under  Partnership. 

Foreclosure. — A  proceeding  by  which  mortgaged  property  is  taken 
or  sold  by  the  mortgagee  in  order  to  pay  the  debt.  It  very 
often  consists  of  a  suit  at  law. 

Forgery. — The  fraudulently  making  or  altering  of  a  written  instrument 

Fraud. — A  statement  of  facts  known  to  be  false,  or  concealment  of 
facts  known  to  be  true,  made  to  induce  a  party  to  do  some- 
thing against  his  interest,  when  the  case  is  not  such  that  with 
reasonable  caution  and  inquiry  he  could  ascertain  the  truth  for 
himself. 

Freight. — Two  meanings: 

1.  The  compensation  to  be  paid  a  carrier  for  the  transportation 
of  goods. 

2.  The  goods  themselves  while  being  transported. 
Full  Indorsement. — See  under  Indorsement. 

Full  Insurance.  —See  under  Insurance. 

General  Assignment. — See  under  Bankruptcy. 

General  Average. — A  contribution  to  be  paid  by  the  different  owners 
of  a  vessel  and  cargo  to  one  of  their  number,  when  his  property 
has  been  voluntarily  and  successfully  sacrificed  to  save  the  rest. 
See  also  Average  under  Insurance. 

General  Partner. — See  under  Partnership. 

Greenback. — See  under  Money. 

Guarantee. — To  agree  to  hold  one's  self  responsible  if  another  person 
does  not  do  a  certain  thing  he  has  agreed  to  do.  It  means  the 
same  as  Guaranty,  but  is  used  both  as  a  verb  and  as  a  noun, 
while  the  latter  is  only  used  commonly  as  a  noun. 

Guarantor. — One  who  agrees  to  hold  himself  responsible  if  another 
person  does  not  do  a  certain  thing  he  has  agreed  to  do.  Means 
nearly  the  same  as  Surety. 

Guaranty. — Two  meanings: 

1.  An  agreement  to  hold  one's  self  responsible  if  another  person 
does  not  do  a  certain  thing  he  has  agreed  to  do.  In  this 
sense  it  means  the  same  as  Guarantee. 


Definitions.  263 


2.  An  agreement  to  hold  one's  self  responsible  if  a  certain  thing 
does  not  turn  out  to  be  as  represented.  In  this  sense  it  means 
the  same  as  Warranty. 

Guaranty  Commission. — The  commission  paid  to  a  commission  mer- 
chant who  guarantees  to  his  principal  the  payment  of  the  money 
for  which  the  goods  may  be  sold 

Highway. — A  road  which  every  one  has  the  right  to  use. 

PRIVATE  ROAD. — A  road  which  only  the  owners  of  certain  prop- 
erty have  the  right  to  use. 

Hotel  Keeper. — One  whose  business  is  to  provide  food  and  lodging 
for  any  one  who  may  ask  and  pay  for  them. 

House  (in  partnership). — See  under  Partnership. 

Idiot. — See  under  Lunatic. 

Implied  Contract. — See  under  Contract. 

Indemnity  Bond. — See  under  Bond. 

Indorsement  (of  commercial  paper). — Two  meanings: 

1.  A  name,  with  or  without  other  words,  written  on  the  back  of 
the  paper. 

2.  The  agreement,  implied  in  one's  writing  his  name  on  the 
back  of  commercial  paper,  to  pay  it  if  the  principal  debtor 
does  not.     A  kind  of  guaranty. 

BLANK  INDORSEMENT,  or  . 

INDORSEMENT  IN  BLANK,  f  One  in  which  no  particular  person  is 
named  as  the  one  to  whom  payment  is  to  be  made.  It  ordi- 
narily consists  of  the  indorser's  name  alone. 

FULL  INDORSEMENT,   or  j 

INDORSEMENT  IN  FULL.  )  One  in  which  payment  is  ordered  to 

be  made  to  a  particular  person  named. 
Indorser. — See  under  Parties  to  Commercial  Paper. 
Infringement  (of  a   patent). — The   making,  using,  or  selling  of  a 

patented  article  without  the  permission  of  the  owner  of  the 

patent. 
Infringement  (of  a  copyright). — The  printing,  publishing,  or  selling 

of  a  copyrighted  article,  without  the  permission  of  the  owner  of 

the  copyright. 
Infringement  (of  a  trade- mark). — The  using  of  another's  trade-mark, 

or  an  imitation  of  it,  without  his  permission. 
Injunction. — See  under  Remedy. 
Innkeeper.— Means  the  same  as  Hotel  Keeper. 
Insolvency. — Means  the  same  as  Bankruptcy. 


264  I>efinitions. 


Insurance. — A  contract  to  secure  one  against  certain  risks. 

FIRE  INSURANCE.— A  contract    to  pay   the    owner,  of   certain 

property  all  his  loss  (up  to  a  certain  amount),  if  it  is  damaged 

or  destroyed  by  fire  within  a  certain  time. 
MARINE  INSURANCE. — A  contract  to  pay  the  owner  of  property 

a  certain  proportion  of  his  loss  if  it  is  damaged  or  destroyed 

while  on  the  sea  within  a  certain  time. 
LIFE  INSURANCE. — A  contract  to  pay  a  certain  sum  of  money  on 

the  death  of  a  certain  person,  or  when  he  reaches  a  certain  age. 

A.   Terms  used  in  all  kinds  of  insurance. 
INSURER. — The  party  (usually  a  company)  agreeing  to  make  the 

insurance. 

INSURED. — The  party  agreeing  to  pay  the  premium. 
POLICY. — The  written  contract  of  insurance. 
PREMIUM. — The  amount  to  be  paid  annually  or  otherwise  for  the 

insurance  by  the  insured. 
PREMIUM  NOTE. — A  note  given  in  payment  of  a  premium  or  a 

part  of  it. 

EARN  (a  premium). — To  become  entitled  to  the  premium  be- 
cause the  risk  has  been  assumed  and  incurred. 

B.   Terms  used  in  fire  and  marine  insurance. 
UNDERWRITER. — Another  word  for  Insurer. 
FULL  INSURANCE. — Insurance,    the    total    amount    of  which, 

whether  by  one  or  by  several  policies,  equals  the  value  of  the 

property  insured. 

C.   Terms  used  in  marine  insurance  alone. 
OPEN  POLICY. — Two  meanings: 

1.  One  which  does  not  fix  the  value  of  the  property  insured. 

2.  One  intended  to  cover  all  goods  shipped  within  a  certain 
time  by  a  certain  party,  the  particular  goods  and  amounts  of 
insurance  to  be  indorsed  upon  the  policy  from  time  to  time. 

VALUED  POLICY. — One  which  fixes  the  value  of  the  property 
insured. 

AVERAGE. — Loss  or  damage  to  property  at  sea,  for  which  an  in- 
surer is  responsible. 

GENERAL  AVERAGE. — A  loss  to  be  paid  by  an  insurer  who  has 
insured  particular  goods,  on  account  of  a  contribution  paid  by 
their  owner  to  another  owner  of  property  upon  that  voyage 
whose  property  was  voluntarily  and  successfully  sacrificed  to 
save  the  rest. 


Definitions.  265 

PAKTICULAK  AVEKAGE. — Two  meanings: 

1.  A  loss  to  be  borne  by  the  particular  owner  or  his  insurer; 
any  average  not  general. 

2.  A  partial  loss  of  the  property  insured;  any  loss  or  damage 
not  a  total  loss.  , 

DEVIATION. — A  voluntary  departure,  not  absolutely  necessary, 

from  the  ordinary  course  taken  in  a  particular  voyage. 
ABANDONMENT. — The  giving  up  to  an  insurer  by  the  insured  of 
what  remains,  after  a  loss  or  injury  amounting  to  one-half  the 
property  in  value,  and  claiming  the  full  amount  of  insurance. 
Insurance  Broker. — See  under  Broker. 
Insured. — See  under  Insurance. 
Insurer.— See  under  Insurance. 
Interest. — See  under  Principal  and  Interest. 
Judgment. — See  under  Remedy. 
Landlord  and  Tenant: 

LANDLORD. — One  who  lias  granted  to  another  for  a  period  the 

sole  use  of  certain  real  estate. 
TENANT. — One  to  whom  another  has  granted  for  a  period  the 

sole  use  of  certain  real  estate. 
SUBTENANT. — The  tenant  of  a  tenant. 
UNDERTENANT. — Another  word  for  Subtenant. 

Law. — A.  direction  from  the  governing  power  of  a  country  to  its  in- 
habitants, telling  them  what  they  must  or  must  not  do,  and  reg- 
ulating the  effect  of  their  acts. 

CONSTITUTION  (in  the  U.  S). — A  written  instrument  adopted  by 
the  people  of  a  State,  or  of  the  Nation,  regulating  certain 
fundamental  matters  of  government. 
LEGISLATURE. — A  body  created  by  a  constitution,  and  given 

power  by  it  to  enact  laws  upon  certain  subjects. 
STATUTES. — Laws  enacted  separately  by  a  legislature. 
COMMON  LAW. — The  great  body  of  rules  of  law,  established  long 

ago  in  England,  and  adopted  in  each  State  as  a  body  of  law. 
Lease. — A  contract  by  which  one  grants  to  another  for  a  period  the 
sole  use  of  certain  real  estate. 

ASSIGNMENT  OP  A  LEASE. — The  transfer  by  a  tenant  to  another 
person  of  all  his  rights  to  the  real  estate  mentioned  in  the 
lease,  for  the  whole  unexpired  period. 

SUBLEASE. — A  lease  from  a  tenant  to  another  person  of  the 
whole  or  a  part  of  the  land,  for  a  part  of  the  time. 


266  Definitions. 


UNDERLEASE. — Another  word  for  Sublease. 

Legal  Holidays. — Certain  days  appointed  by  law  upon  which  it  is 
recommended  that  people  refrain  from  their  ordinary  business. 

Legal  Kate  (of  interest). — See  under  Principal  and  Interest. 

Legal  Tender. — See  under  Money. 

Legislature. — See  under  Law. 

Letters  Patent. — See  under  Patent. 

Liability. — The  state  of  being  bound  by  law  to  take  the  legal  conse- 
quences of  a  certain  thing's  being  or  not  being  done ;  responsi- 
bility. 

Lien  (on  personal  property). — The  right  of  a  creditor  to  keep  certain 
property  belonging  to  the  debtor  until  the  debt  is  paid. 

Lien  (on  real  estate). — The  right  of  a  creditor  to  have  certain  prop- 
erty, which  at  the  time  the  lien  was  created  did  belong  to  the 
debtor,  sold  in  order  to  pay  the  debt. 

Life  Insurance. — See  under  Insurance. 

Limited  Partnership. — See  under  Partnership. 

Lunatic. — One  who  has  once  possessed  reasoning  power,   but  has 
lost  it. 
IDIOT. — One  who  never  had  reasoning  power. 

Maker  (of  a  note). — See  under  Parties  to  Commercial  Paper. 

Marine  Insurance. — See  under  Insurance. 

Maturity  (of  commercial  paper). — The  time  at  which  it  is  legally  to 
become  due. 

Merchandise  Broker. — See  under  Broker. 

Minor. — A  person  under  twenty-one  years  of  age. 

Money. — Anything  accepted  and  used  by  the  people  of  a  country 
generally,  as  representing  so  much  value. 
LEGAL  TENDER. — That  kind  of   money  which  by  law  can   be 

offered  in  payment  of  a  debt. 
CURRENCY. — Two  meanings: 

1.  The  same  as  Money. 

2.  Paper  money. 

BANK  BILL. — A  written  promise  to  pay  to  the  bearer  on  demand 

a  certain  sum  of  money,  issued  by  a  bunk  and  used  as  money. 
UNITED  STATES  NOTE. — A  written  promise  to  pay  to  the  bearer 

on  demand  a  certain  sum  of  money,  issued  by  the  United 

States  Government,  and  used  as  money. 
COIN. — Pieces  of  metal  stamped  and  intended  to  be  used  as 

money. 


Definitions.  267 


GREENBACKS. — The  United  States  Notes. 
Mortgage  (of  real  estate) : 

1.  As  to  form:  A  conditional  deed ;  a  transfer  of  ownership,  to 
become  void  if  a  certain  thing  is  done,  usually  if  certain  money 
is  paid. 

2.  As  to  effect:  A  right  given  by  a  debtor  to  a  creditor  to  have 
certain  property  sold  (if  necessary)  in  order  to  pay  a  certain 
debt. 

MORTGAGOR. — One  who  gives  a  mortgage  upon  his  property. 

MORTGAGEE. — One  to  whom  a  mortgage  is  given. 
Necessaries  (for  which  a  minor  may  bind  himself  by  contract). — All 

things  necessary  or  appropriate  for  the  sustenance  or  convenience 

of  the  minor  in  his  way  of  life. 
Negotiability. — Two  meanings: 

1.  The  quality  in  commercial  paper  of  being  enforceable  by  one 
person  who  receives  it  under  certain  circumstances,   even 
though  not  enforceable  by  the  one  from  whom  he  receives  it. 

2.  The  quality  of  being  salable  in  the  market  without  difficulty; 
salableness. 

Negotiable  Note. — A  promise  to  pay,  at  a  certain  time,  to  a  certain 
person  or  his  order,  or  to  the  bearer,  a  certain  sum  of  money 
iinconditionally. 

Negotiable  Securities. — All  kinds  of  evidences  of  indebtedness,  be- 
sides commercial  paper,  negotiable  in  form. 

Non-acceptance  (of  a  draft). — The  neglect  or  refusal  of  the  person 
drawn  upon  to  accept  it.  See  Acceptance. 

Note. — See  under  Commercial  Paper. 

Notice  to  Quit. — A  notice  from  a  landlord  to  his  tenant  to  deliver  up 
possession  of  the  premises  to  him  at  a  certain  time. 

Open  Policy. — See  under  Insurance. 

Outlawed  (spoken  of  a  debt). — To  have  existed  for  the  certain  length 
of  time,  after  which  the  law  on  that  ground  alone  prevents 
its  being  enforced. 

Par. — Means  the  same  as  Par  value. 

Particular  Average. — See  under  Insurance. 

Parties  to  Commercial  Paper : 

MAKER  (of  a  note). — The  person  making  the  original  promise, 

the  signer. 

DRAWER  (of  a  draft  or  check).— The  person  making  the  original 
order  (i.e.,  drawing  the  paper],  tlie  signer. 


26S  Definitions. 


PERSON  DRAWN  UPON  (in  a  draft  or  check). — The  person  to  whom 

the  order  is  addressed.     In  a  check  this  is  the  bauk. 
PAYEE  (of  any  kind  of  commercial  paper). — The  person  named 

in  the  body  of  the  instrument  as  the  one  to  whom  payment  is 

to  be  made. 
ACCEPTOR  (of  a  draft)  — The  person  drawn  upon,  after  he  has 

accepted  it  (i.e.,  agreed  to  pay  it). 
INDORSER  (of  any  kind  of  commercial  paper). — Any  one  who 

writes  his  name  upon  the  back  of  it. 
Partner. — See  under  Partnership. 
Partnership. — Two  meanings: 

1.  The  relation  established  between  two  or  more  persons  by  an 
agreement  to  combine  their  money,  property,  labor,  or  skill 
in  some  lawful  business,  and  to  share  its  profits. 

2.  Another  word  for  Firm. 

PARTNER. — Any  one  of  the  parties  agreeing  as  above  to  form  a 
partnership. 

SECRET  PARTNER. — One  who  really  is  a  partner,  though  not  ad- 
vertised as  such  to  outsiders. 

FIRM. — All  the  partners  taken  collectively. 

HOUSE. — Another  word  for  Firm. 

ARTICLES  OP  COPARTNERSHIP. — A  written  agreement  between 
partners,  forming  a  paitnership. 

CAPITAL. — The  money  or  property  contributed  by  the  partners 
to  be  used  in  the  business. 

LIMITED  PARTNERSHIP. — One  formed  under  a  special  law,  and 
in  which  there  are  one  or  more  partners  whose  property  can- 
not be  taken  to  pay  the  debts  of  the  firm,  beyond  the  money 
they  have  contributed  to  it. 

SPECIAL  PARTNER. — A  partner  in  a  limited  partnership  whose 
property  cannot  be  taken  to  pay  the  debts  of  the  firm,  beyond 
the  money  he  has  contributed  to  it. 

GENERAL  PARTNER. — A  partner  in  a  limited  partnership  who  is 
responsible  for  the  debts  to  the  same  extent  as  in  an  ordinary 
partnership. 
Party- Wall. — A  wall  owned  and  used  jointly  by  the  owners  of  two 

pieces  of  real  estate. 
Par  Value. — See  under  Corporation. 
Patent, — Two  meanings: 

1.  The  right  granted  by  the  Government  to  an  inventor,  to  pre- 
vent all  others  from  making,  using,  or  selling  his  invention 


Definitions.  269 


without  his  consent,  within  the  country,  for  a  certain  number 
of  years.     In  this  sense  it  is  equivalent  to  patent-right. 
2.  The  written  instrument  by  which  the  Government  grants  the 

right.     In  this  sense  it  is  equivalent  to  letters-patent. 
Pawn. — Means  the  same  as  Pledge,  but  is  commonly  used  only  in  con- 
nection with  a  pawnbroker's  business. 
Pawnbroker. — One  who  makes  it  a  business  to  loan  money  in  small 

sums  on  pledges  of  articles  of  personal  property. 
Payee. — See  under  Parties  to  Commercial  Paper. 
•  Perils  of  the  Sea. — Extraordinary  risks  attendant  upon  a  sea-voyage 

which  canuot  reasonably  be  foreseen  and  provided  against. 
Personal  Property. — See  under  Real  Estate. 
Pledge. — Two  meanings: 

1.  A  delivery  by  a  debtor  to  his  creditor  of  certain  personal 
property  with  the  agreement  that  it  may  be  held  as  security 
for  the  debt.     See  also  Chattel  Mortgage  and  Pawn. 

2.  The  property  pledged. 
COLLATERAL. — Personal  property  pledged. 

Policy. — See  under  Insurance. 

Power  of  Attorney. — See  under  Agency. 

Preference  (in  general  assignment). — See  under  Bankruptcy. 

Premium. — See  under  Insurance. 

Premium  Note. — See  under  Insurance. 

Price. — See  under  Sale. 

Principal  and  Agent. — See  Agency. 

Principal  and  Interest : 

PRINCIPAL. — The  sum  of  money  upon  which  interest  is  to  be 

reckoned. 

INTEREST. — A  certain  percentage  to  be  paid  by  a  debtor  to  his 
creditor,  in  addition  to  the  principal,  as  compensation  for  its 
use. 

USTTRY. — That  part  of  the  interest  agreed  to  be  paid  for  a  loan  of 
money,  which  exceeds  the  highest  rate  that  the  parties  are 
allowed  by  law  to  make. 

LEGAL  KATE. — That  rate  established  bylaw  to  apply  to  all  cases 
where  interest  is  allowed,  but  in  which  the  parties  have  not 
specified  any  rate. 
Principal  and  Surety : 

PRINCIPAL. — A  person  for  whose  debt,  default,  or  misconduct, 
another  person  has  agreed  with  a  third  party  to  make  himself 
responsible. 


270  Definitions. 


SUEETT. — A  person  who  has  agreed  with  another  to  make  himself 
responsible  for  the  debt,  default,  or  misconduct  of  a  third  party 
Private  Carrier. — See  under  Carrier. 
Private  Eoad. — See  under  Highway. 
Promissory  Note. — The  same  as  Note. 
Protest  (of  commercial  paper). — Two  meanings: 

1.  The  presenting  of  the  instrument  to  the  principal  debtor  for 
payment  or  acceptance,  and  sending  notice  of  its  non-payment 
or  non-acceptance  to  those  secondarily  responsible. 

2.  A  written  paper  sometimes  drawn  up  by  a  notary  public,  to 
be  attached  to  dishonored  commercial  paper. 

Public  Agent. — An  officer  of   the  National,  State,  City,  Town,  or 

other  Government;  an  agent  of  the  people. 
Ratification  (in  agency). — An  adoption  by  the  principal,  either  by 

words  or  acts,  of  some  unauthorized  act  after  it  has  been  per- 
formed by  some  one  as  his  agent. 

Ratification  (of  minor's  act). — A  consent  by  the  minor,  after  he  be- 
comes of  age,  to  be  bound  by  the  act. 
Real  Estate. — Land  and  everything  affixed  or  appurtenant  to  it. 

PERSONAL  PROPERTY. — All  property  not  real  estate. 
Real  Estate  Broker. — See  under  Broker. 
Real  Property. — Another  term  for  Real  Estate. 
Receipt.— A  written  acknowledgment  by  one  receiving  money  or 

other  property,  that  it  has  been  received. 
Receiver. — See  under  Corporation. 
Recording  (of  deeds,  etc.). — Handing  the  paper  to  the  proper  officer  to 

be  recorded. 

Redeem  (a  pledge). — To  pay  the  debt  for  which  it  is  held. 
Remedy.— A  method  provided  by  law  of  redressing  a  wrong,  or  of 

punishing  a  wrong-doer. 

CIVIL  REMEDY. — The  method  of  redressing  an  injury  inflicted 
by  one  person  upon  another. 

CRIMINAL  REMEDY. — The  method  of  punishing  a  wrong-doer 
for  some  wrong  committed  by  him  against  society. 

DAMAGES. — Compensation  in  money  to  be  paid  by  one  person 
to  another  for  an  injury  inflicted  by  the  former  upon  the  latter. 

JUDGMENT. — The  decree  of  a  court. 

INJUNCTION. — The  decree  of  a  court  forbidding  a  certain  per- 
son to  do  a  certain  act. 

EXECUTION. — A  written  command  issued  to  a  sheriff,  after  a 
judgment,  directing  him  to  enforce  it. 


Definitions.  271 


Bent. — Money  paid  by  a  tenant  to  his  landlord  for  the  use  of  the 

property. 
Responsibility. — Two  meanings: 

1.  The  same  as  Liability. 

2.  The  having  of  sufficient  property  to  pay  all  ordinary  obligations. 
Revenue  Law. — A  law  imposing  a  tax  or  duty. 

Bight  of  Way. — The  right  of  the  owner  of  one  piece  of  real  estate  to 

pass  over  another's  property  at  a  certain  place. 

Sale. — An  agreement  between  two  parties  that  certain  property,  be- 
longing to  one,  shall  immediately  belong  to  the  other,  and  that 

he  shall  pay  for  it  in  money. 

AGREEMENT  TO  SELL. — An  agreement  between  two  parties  that 
they  will  at  some  future  time  make  an  agreement  of  sale  with 
regard  to  particular  property. 

CONDITIONAL  SALE. — An  agreement  between  two  parties  that 
certain  property  belonging  to  one  shall  at  some  future  time 
belong  to  the  other,  provided  a  certain  thing  does  or  does  not 
happen. 

BARTER. — An  agreement  between  two  parties,  when  carried  out, 
that  certain  property  belonging  to  one  shall  immediately  be- 
long to  the  other,  and  that  certain  other  property  belonging  to 
the  latter  shall  immediately  belong  to  the  former. 

PRICE. — The  amount  of  money  for  which  the  owner  of  property 
is  willing  to  sell  it;  the  money  agreed  to  be  paid  in  a  sale. 

VALUE. — The  amount  of  money  people  in  general  would  pay  for 

the  property. 
Salvage. — Two  meanings: 

1.  The  compensation  allowed  to  one  who  voluntarily  saves  prop- 
erty abandoned  or  in  great  peril  at  sea. 

2.  The  property  saved  after  a  disaster. 

Searching  a  Title  (to  real  estate). — Examining  the  successive  deeds 

nnd  records  relating  to  the  property. 
Seaworthy  (spoken  of  a  vessel). — Able  to  withstand  the  ordinary 

dangers  of  the  sea,  and  fully  equipped  with  all  the  things  usually 

needed  on  such  a  voyage  as  she  is  intended  to  take. 
Secret  Partner. — See  under  Partnership. 
Security  (for  a  debt). — Some  right  which  the  creditor  has  to  rely 

upon,  besides  the  mere  promise  of  the  debtor.     Guaranty,  lien, 

pledge  and  mortgage  are  instances  of  security. 
Set-off. — A  claim  which  one   party  has  against  another  who  has  a 

claim  against  him;  a  counter-debt. 


272  Definitions. 

Shareholder. — See  under  Corporation. 

Ship  Broker. — See  under  Broker. 

Shipper. — One  who  gives  merchandise  to  another  for  transporta- 
tion. 

Sight  Draft. — A  draft  made  payable  at  sight. 

TIME  DRAFT. — A  draft  made  payable  at  a  certain  time,  or  a 
certain  number  of  days  or  months  after  sight. 

Special  Partner.— See  under  Partnership. 

Statute. — See  under  Law. 

Stock. — See  under  Corporation. 

Stock  Broker. — See  under  Broker. 

Stockholder.— See  under  Corporation. 

Stop  Payment  (of  a  check). — To  notify  the  bank,  before  the  check 
has  been  presented,  not  to  pay  it. 

Sub-Agent. — See  under  Agency. 

Sublease. — See  under  Lease. 

Subtenant. — See  under  Landlord  and  Tenant. 

Surety. — See  under  Principal  and  Surety. 

Suretyship. — The  state  of  being  a  surety. 

Tenant. — See  under  Landlord  and  Tenant. 

Third  Party. — See  under  Agency.  In  general,  this  is  a  term  used  in 
connection  with  any  transaction  between  two  parties  to  denote 
any  other  person  whom  the  transaction  may  affect  at  the  time  or 
afterwards. 

Time  Draft.— See  under  Sight  Draft. 

Title  (to  property). — The  right  to  own  it;  the  ownership. 

Trade-Mark. — A  peculiar  device  or  name  attached  by  a  merchant 
or  manufacturer  to  his  own  goods,  as  a  mark  by  which  they  may 
be  known. 

Trust. — The  holding  of  property  by  one  for  the  benefit  of  another. 

Trustee. — One  who  holds  property  for  the  benefit  of  another. 

Underlease. — See  under  Lease. 

Undertenant. — See  under  Landlord  and  Tenant. 

Underwriter. — See  under  Insurance. 

United  States  Note. — See  under  Money. 

Usury. — See  under  Principal  and  Interest. 

Value. — See  under  Sale. 

Valued  Policy. — See  under  Insurance. 

Warranty. — An  agreement  to  hold  one's  self  responsible  if  a  certain 
thing  does  not  turn  out  to  be  as  represented. 


FORMS. 


IKDEX  TO  FOEMS. 


PAGE 

Affidavit 297 

Bill  of  Exchange 279 

Bill  of  Lading 288 

Bill  of  Sale 295 

Bond 300 

Bond  of  Indemnity 286 

Broker's  Contract , 287 

Certificate  of  Acknowledgment 305 

Certificate  of  Deposit 281 

Certificate  of  Insurance 292 

Certificate  of  Proof 305 

Certificate  of  Stock 286 

Charter-Party • 288 

Chattel  Mortgage 295 

Checks 280 

Covenant  against  Nuisances 300 

Deed 298 

Drafts 278,  279 

General  Assignment 293 

Guaranty 297 

Indorsements 282-284 

Lease 306 

Letter  of  Credit 296 

Mortgage 301 

Notes .f 275-277 

Notice  of  Non-payment 285 

Partnership  Contract 285 

Policy  of  Fire  Insurance 289 

Policy  of  Life  Insurance 292 

Policy  of  Marine  Insurance 290 

Power  of  Attorney 294 

Receipt 294 

Renewal  of  Fire  Insurance 290 


FORMS 

OF  ORDINARY   BUSINESS  PAPERS. 


NOTES. 

FOBM  1.     (a) 


FOEM  2.     (6) 


276 


Forms. 


FORM  3.     (c) 


' 


FORM  4. 


.  +6*6 
' 


•  A 
' 


Forms. 


277 


FOKM  5.     (a) 


fz 


FOEM  6. 
NOTE  NON-NEGOTIABLE  IN  FORM. 


(  v<a<frtt€- 


278 


Forms. 


.' 


DRAFTS 


FORM  7.     (a) 


•C#i>£Z-'l-<2-'i 

Of. 


. 


FOEM8.      (V) 


r 


Forms. 


279 


FORM  9.     (a) 

FOREIGN  BILL  OF  EXCHANGE. 


&£    •e$>C'rz-fZ''tzia&  fd'ee&wtz 
&  (7      > 

M-- 
' 


,/ 
ds£et-M'' 


S 

<wuz 


cK 


C/.    GMtist'V-'& 


FORM  10.     (d) 

ACCEPTED  DRAFT. 


1O 


y  7,  y^J^y  .    A 


. 
tz-wfz 


<7 


(Written  across  the  face,  C&coefate 


280 


Forms. 


CHECKS 


FORM  11.     (a) 


4C/O 


^  o£fe£^/£. 


-£& 


-tec 


FORM  12.     (rf) 

CERTIFIED     CHECK. 


S 


Written  across  the  face, 


Forms. 


281 


FORM  13.     (a) 

CERTIFICATE  OP  DEPOSIT. 


: 


<iw. 


X 

r£'l 


282 


Forms. 


HSTDOR  SEMENTS. 


FOEM  14. 


Ut 


O\    Cx>^ 


(/i&med' 


[The  above  is  an  example  of  the  indorsements  that  would  appear 
on  the  back  of  either  Forms  1,  5,  or  11,  if  Fay  made  a  full  indorse- 
ment to  Mapes,  Mapes  a  full  indorsement  to  Brown,  and  Brown  a 
blank  indorsement  to  some  one  else.] 


Forms. 


283 


FORM  15. 


. 
r 

[The  above  is  an  example  of  how  Form  2  might  be  indorsed.] 


FORM  16. 


<2. 


(/• 


(ft 

[Forms  7  or  9  might  be  indorsed  thus.] 


284 


Forms. 


FORM  17. 

INDORSEMENTS  WITHOUT  RECOURSE. 


[in  full] 


\^7. 


[blank] 


Forms.  285 


FORM  18. 

NOTICE  OF  NON-PAYMENT. 

To  Messrs.  James  S.  Fay,  S.  B.  Mapes,  and  Jaines  Brown,  and  each 
of  them: 

Gentlemen:  You  will  please  take  notice  that  a  note  for  $200, 
signed  by  Archibald  Brothers,  dated  December  3,  1881,  due  February 
6th,  1882,  and  indorsed  by  you,  was  duly  presented  by  me,  the  holder, 
to  the  makers  for  payment  and  was  not  paid,  and  that  I  shall  look 
to  you  for  payment  thereof. 

Respectfully, 

EUGENE  H.  LEWIS. 

[The  above  would  be  appropriate  to  the  case  of  non-payment  of  the  note  in 
form  1  indorsed  as  in  form  14.] 


FORM  19. 

ARTICLES  OF  COPARTNERSHIP. 

Articles  of  agreement  made  December  3d,  1881,  between  Charles 
S.  Mead  and  Gregory  Ross: 

I.  The  said  parties  hereby  agree  to  become  co  partners,  under  the 
firm  name  of  Mead  and  Ross,  and  as  such  partners  to  carry  on  to- 
gether the  business  of  buying  and  selling  all  sorts  of  dry  goods,  at 
No,  547  Fulton  Street  in  the  city  of  Brooklyn; 

II.  The  said  Charles  S.  Mead  agrees  to  contribute  two  thousand 
dollars  ($2000),  to  the  capital  of  said  firm;  and  the  said  Gregory  Ross 
agrees  to  contribute  one  thousand  dollars  ($1000)  to  the  same ;  the 
sum  of  $2500  of  said  capital  to  be  expended  in  the  purchase  of  a 
stock  in  trade ; 

III.  The  said  Mead  shall  have  exclusive  charge  of  all  the  buying 
for  the  firm ; 

IV.  All  the  net  profits  arising  out  of  the  business  shall  be  divided 
in  the  following  proportions,  two -thirds  to  the  said  Mead,  and  one- 
third  to  the  said  Ross; 

V.  Each  partner  will  devote  all  his  time  to  the  said  business,  and 


286  Forms. 

will  use  his  best  efforts  to  make  the  business  successful,  and  pro- 
mote the  interests  of  the  firm  in  every  way; 

VI.  If  on  the  closing  out  of  said  business  there  shall  have  been  a 
net  loss  it  shall  be  borne  equally.  CHARLES  S.  MEAD. 

GREGORY  Ross. 

[NOTE.— There  are  a  great  many  other  clauses  which  might  be  added,  provid- 
ing for  different  contingencies  which  might  arise.  Of  course,  the  parties  may 
make  any  sort  of  an  agreement  they  choose.  Unless  they  were  fully  ac- 
quainted with  and  could  unreservedly  trust  each  other,  it  would  be  unsafe  to 
trust  to  so  meagre  a  contract  as  the  above.] 


FORM  20. 

CERTIFICATE  OF  STOCK  IN  A  CORPORATION. 
THE  RIVER  SHORE  RAILWAY  COMPANY. 

•  This  is  to  certify,  that  Caroline  O.  Holmes  is  entitled  to  fifty- 
Q    four  (54)  shares  of  the  capital  stock  of  the  River  Shore  Railway 
H    Company,  of  one  hundred  dollars  each,  transferable  only  on  the 

fc   books  of  the  said  company,  by  the  said  Caroline  O.  Holmes  or 

*  her  attorney,  upon  the  surrender  of  this  certificate. 
g       Dated,  New  York,  December  3d,  1881. 

HORACE  QUEEN,  CHARLES  MARTIN, 

Treasurer.  President. 


FOKM  21. 

BOND  OF  INDEMNITY. 

Know  all  men  by  these  presents,  that  I,  John  A.  Sergeant,  of 
Cleveland,  Ohio,  am  held  and  firmly  bound  unto  Abraham  Bell  of  the 
same  place,  in  the  sum  of  ten  thousand  dollars,  to  be  paid  to  the  said 
Abraham  Bell,  his  executors  or  administrators,  for  which  payment, 
well  and  truly  to  be  made,  I  do  bind  myself,  my  heirs,  executors 
and  administrators,  firmly,  by  these  presents. 

Sealed  with  my  seal.  Dated  this  5th  day  of  December,  1881. 
Whereas,  Abraham  Bell  is  about  to  employ  my  nephew,  William  K. 
Reynolds,  as  cashier  in  his  store,  for  the  term  of  one  year  from 
January  1st,  1882; 


Forms.  287 

Now  the  condition  of  this  obligation  is  such  that  if  the  said 
William  K.  Reynolds  shall  fully  perform  all  the  duties  of  his  said 
employment,  and  promptly  and  correctly  account  for  and  pay  over 
all  the  money  or  property  of  the  said  Abraham  Bell  which  may  come 
into  his  hands  during  its  course,  then  this  obligation  shall  be  void; 
otherwise  to  remain  in  full  force. 

JOHN  A.  SERGEANT. 

[This  bond  means  this:  that  if  Reynolds  does  his  duties  as  cashier,  Sergeant's 
bond  will  be  superfluous  and  void;  but  if  Reynolds  should  run  away  with  any  of 
Bell's  money,  or  fail  to  perform  his  duties  in  any  other  way,  then  Sergeant  must 
pay  Bell  the  loss,  up  to  $10,000.  The  effect  is  the  same  as  if  it  read,  "  I,  John  A. 
Sergeant,  agree  to  pay  Abraham  Bell  whatever  loss  he  may  suffer  through  the 
fault  of  William  K.  Reynolds,  as  his  cashier  for  one  year  from  January  1, 1882, 
up  to  the  amount  of  $10,000."] 


FORM  22. 

MERCHANDISE  BROKER'S  CONTRACT. 
I. 

MEMORANDUM  TO  BE  GIVEN  TO  THE  SELLER. 

NEW  YORK,  Dec.  5,  1881. 
Messrs.  White,  Ludlow  &  Co.,  41  Broadway: 

We  have  sold  to-day  on  your  account  to  Joseph  Armstrong,  13 
South  William  Street,  the  following  goods :  1000  ounces  Sulphate  of 
Quinine  B.  and  G.  at  $2.75  per  ounce. 

Respectfully, 

MERRIAM  &  CHAPIN, 

Brokers. 
II. 
MEMORANDUM  TO  BE  GIVEN  TO  THE  BUYER. 

NEW  YORK,  Dec.  5,  1881. 
Mr.  Joseph  Armstrong,  13  South  William  Street: 

We  have  to-day  bought  for  your  account,  from  White,  Ludlow  & 
Co.,  the  following: 

1000  ounces  Sulphate  of  Quinine  B.  and  G.  at  $2.75  per  ounce. 

Respectfully, 

MERRIAM  &  CHAPIN, 
Brokers. 


288  Forms. 


FORM  23. 

CHARTER-PARTY. 

These  articles  of  agreement  made  December  5th,  1881,  between 
6.  T.  Riley,  party  of  the  first  part,  and  Albert  T.  Mellon,  party  of 
the  second  part,  witnessed! : 

The  said  party  of  the  first  part  has  this  day  chartered  and  hirgd 
unto  the  party  of  the  second  part  the  ship  The  Nile,  of  New  Lon- 
don, Conn.,  of  the  burden  of  1000  tons  or  thereabouts,  with  all  the 
appurtenances,  cables,  anchors,  chains,  etc. ,  which  belong  to  her, 
for  the  term  of  one  year,  from  January  1st  next,  to  be  delivered  at 
pier  80,  East  River,  in  the  harbor  of  New  York. 

For  the  use  of  said  vessel  the  party  of  the  second  part  agrees  to 
pay  the  sum  of  $2000,  payments  to  be  made  as  follows:  one  half 
thereof  to  be  paid  at  the  end  of  six  months,  and  the  other  half  at 
the  end  of  the  year. 

The  party  of  the  second  part  shall  be  at  all  the  expense  of  man- 
ning and  furnishing  said  vessel,  and  shall  return  the  same  to  the  said 
I^iley  at  the  port  of  New  London,  in  as  good  condition  as  she  now 
is,  excepting  ordinary  wear  and  tear. 

In  witness  whereof  the  parties  have  hereunto  set  their  hands  and 
seals.  S.  T.  RILEY,  [Seal.] 

A.  T.  MELLON.       [Seal.] 


FORM  24. 

BILL  OP  LADING. 

NEW  YORK,  December  6,  1881. 

Shipped,  in  good  order,  and  well  conditioned,  by  John  C.  God- 
dard on   board   the  ship  Nile 

whereof  Sylnanus    Bond is 

Marked  as  follows:  ,    .       .    ,,  ,  ,,.       „    , 

Anthony  Willoughby,    master,  now  lying  mthe  port  of  JVew  York  .  .  . 
Rio  Janeiro.  and  hound  for  the  port  of  Rio  Jan, 

eiro 1000  barrels  flour,  being  marked  and  numbered 

as  in  the  margin,  and  are  to  be  delivered  in  the  like  order  and  con- 
dition at  the  port  of  Rio  Janeiro (the  dangers  of 

the  seas  only  excepted)  unto  Anthony  Willoughby 


Forms.  289 

or  his  assigns,  he  or  they  paying  freight  for  the  said  cases,  with  ten 
cents  primage  and  average  accustomed. 

In  witness  whereof  I  have  affirmed  to  three  bills  of  lading,  all  of 
this  tenor  and  date;  one  of  which  being  accomplished  the  others  to 
stand  void.  ALBERT  T.  MELLON. 

[In  above  form  Goddard  is  the  shipper  or  consignor,  Willoughby  the  con- 
signee, and  Mellon  the  carrier.  It  might  be  signed  by  the  master  (Bond)  instead 
of  by  Mellon.  Very  often  three  bills  are  made  out:  one  the  master  keeps  and 
two  are  given  to  the  consignor,  of  which  he  keeps  one  and  sends  one  to  the 
consignee.] 


FORM  25. 

FIRE  INSURANCE  POLICY. 

I.  THE  MAIN  CLAUSE. 

No.  567,754.  $5000. 

THE  FRANKLIN  FIRE  INSURANCE  COMPANY,  OF  PHILADELPHIA, 

In  consideration  of  forty-five  dollars,  Do  insure  Edward  A.  Brad- 
ford against  loss  or  damage  by  fire  to  the  amount  of  five  thousand 
dollars  as  follows: 

On  certain  books,  bound  and  unbound,  engravings,  steel  and  cop- 
per plates,  and  other  merchandise  now  contained  in  the  brick  build- 
ing No.  5  Barclay  Street,  New  York  City. 

And  the  said  company  hereby  agree  to  make  good  unto  the  as- 
sured, his  executors,  administrators,  and  assigns,  all  such  immediate 
loss  or  damage  (not  exceeding  in  amounts  the  sum  insured)  as  shall 
happen  by  fire  to  the  property  above  specified,  from  the  17th  day  of 
October,  1874,  at  noon,  to  the  17th  day  of  October,  1875,  at 
noon,  the  amount  of  such  loss  and  damage  to  be  proven  and  paid,  or 
made  good  according  to  the  following  terms  and  conditions: 

[Here  follow  ordinarily  a  large  number  of  additional  clauses.    See  below.] 

In  witness  whereof  we  have  caused  this  policy  to  be  attested  by 
the  president  and  secretary  of  the  company  the  15th  day  of  October, 
1874. 

TIIEO.  M.  I^OGER,  ALFRED  G.  BAKER, 

Secretary.  President. 

II.  EXAMPLES  OF  SOME  OF  THE  ADDITIONAL  CLAUSES. 

(1.)  No  assignment  of  this  policy  shall  be  valid  until  indorsed 
hereou  and  approved  by  the  company. 


290  Forms. 

(2.)  This  company  shall  not  be  liable  for  loss  in  case  of  fire 
caused  by  rioting,  or  by  explosion,  or  in  case  the  assured  shall  keep 
on  the  premises  gunpowder,  fireworks,  phosphorus,  naphtha,  etc. 

(3.)  This  policy  shall  not  be  binding  upon  the  company  until  the 
premium  be  actually  paid. 

(4.)  In  case  there  should  be  any  other  insurance  on  the  property 
hereby  insured,  whether  prior  or  subsequent,  the  assured  shall  be 
entitled  to  recover  on  this  policy  no  greater  proportion  of  the  loss 
sustained  than  the  sum  herein  insured  bears  to  the  whole  amount 
insured  thereon. 


FORM  26. 

RENEWAL  OF  FIRE  INSURANCE. 

NEW  YORK,  Oct.  17,  1875. 
THE  FRANKLIN  INSURANCE  COMPANY,  OF  PHILADELPHIA. 

Do  insure  Edward  A.  Bradford,  in  consideration  of  forty  five  dol- 
lars, being  the  premium  on  five  thousand  dollars:  this  being  a  re- 
newal of  policy  No.  567,754,  which  is  hereby  continued  in  force  for 
one  year,  to  wit,  from  Oct.  17,  1875,  to  Oct.  17,  1876,  at  noon. 
THEO.  M.  I^OGER,  ALFRED  Q.  BAKER, 

Secretary.  Pres. 


FORM  27. 

MARINE  INSURANCE  POLICY. 

No.  56,721. 
BY  THE   INTERNATIONAL  INSURANCE  COMPANY,  OF  LIVERPOOL. 

John  C.  Qoddard,  on  account  of  whom  it  may  concern,  in  case  of 
loss  to  be  paid  in  New  York  in  funds  current  to  him,  does  make  in- 
surance   and  cause to  be  insured,    lost 

insured,      or  not  lost,  at  and  from  New  York  to  Rio  Janeiro  .... 

$500°-       on  1000  bbls.  flour laden, 

or  to  be  laden  on  board  the  good  ship  called  the  Nile.  .  . 

Premium 

$62.50.         rpjie  ggj^  gOO(js  an(j  merchandises  hereby  assured  are 

valued  (premium  included)  at  $ 5000. 


Forms.  291 

Touching  the  adventures  and  perils  which  the  said  assurer  is  con- 
tented to  bear  and  take  upon  itself  in  this  voyage,  they  are  of 
seas,  men-of-war,  fires,  enemies,  pirates,  rovers,  thieves,  jettisons, 
letters  of  mart  and  countermart,  reprisals,  takings  at  sea,  arrests,  re- 
straints, and  detainments  of  all  kings,  princes,  or  people  of  what 
nation,  condition,  or  quality  soever,  barratry  of  the  master  aud 

mariners having  been  paid  the  consideration  for 

this  insurance,  by  the  assured  at  and  after  the  rate  of  one  and  a 
quarter  per  cent 

Provided  always,  and  it  is  hereby  further  agreed,  that  if  the  said 
assured  shall  have  made  any  other  assurance  upon  the  premises 
aforesaid,  prior  in  day  of  date  to  this  policy,  then  the  said  assurer 
shall  be  answerable  only  for  so  much  as  the  amount  of  such  prior 
assurance  may  be  deficient  towards  fully  covering  the  premises 

hereby  assured And  in  case  of  any  insurance  upon 

the  said  premises  subsequent  in  day  of  date  to  this  policy  the  said 
assurer  shall  nevertheless  be  answerable  for  the  full  extent  of  the 

sum    by  it    subscribed    hereto Other   insurance 

upon  the  premises  aforesaid  of  date  the  same  day  as  this  policy  shall 
be  deemed  simultaneous  herewith ;  and  the  said  assurer  shall  not  be 
liable  for  more  than  a  ratable  contribution  in  the  proportion  of  the 
sum  by  it  insured  to  the  aggregate  amount  of  such  simultaneous  in- 
surance  

[There  are  usually  other  clauses  in  the  policy.] 

In  witness  whereof  the  attorneys  of  the  International  Insurance 
Company  have  subscribed  their  names  and  the  sum  insured,  at  New 
York,  this  6th  day  of  December,  1881. 
($5000.)    Five  thousand  dollars. 

MACT  &  CARTER, 

Attorneys. 

[In  abore  form  Goddard  is  the  shipper,  the  consignor,  the  owner  of  the  goods, 
and  the  company  insures  him  fully  against  loss.  Usually  there  are  other 
clauses  in  the  policy,  such  as  one  giving  the  vessel  the  right  to  touch  at  other 
ports,  or  one  making  the  company  responsible  for  no  loss  unless  it  amounts  to 
ten  per  cent  of  the  value.  There  are  also  other  and  different  forms  used,  as 
where  a  vessel  is  to  be  insured,  or  where  a  vessel  or  cargo  is  to  be  insured  dur- 
ing a  trip  on  a  canal.] 


292  Forms. 

FOKM  28. 

CERTIFICATE  OF  INSURANCE. 
THE  INTERNATIONAL  INSURANCE  COMPANY. 

NEW  YORK,  Decembers,  1881. 

This  is  to  certify  that  on  the  6th  day  of  December,  1881,  this  com 
pany  insured,  under  policy  No.  56,721,  made  for  John  C.  Goddard, 
the  amount  of  five  thousand  dollars  on  1000  barrels  of  flour,  valued 
at  $5000,  shipped  on  board  of  the  ship  Nile,  at  and  from  New  York 
to  Rio  Janeiro,  and  it  is  hereby  understood  and  agreed  that  in  case 
of  loss  such  loss  is  payable  to  the  order  of  John  C.  Goddard  on  sur- 
render of  the  certificate. 

This  certificate  represents  and  takes  the  place  of  the  policy,  and 
conveys  all  the  rights  of  the  original  policy-holder,  so  far  as  the 
goods  above  specified  are  concerned. 

MACY  &  CARTER, 

Attorneys. 

[By  transferring  this  certificate  the  rights  under  the  policy  may  be  transfer- 
red by  Goddard  to  any  one  else,  e.g.,  to  one  to  whom  he  sells  the  flour  before  it 
arrives  at  Rio  Janeiro.] 


FORM  29. 

LIFE  INSURANCE  POLICY. 

No.  68,056.  $1000. 

THE  OCCIDENT  LIFE  INSURANCE  COMPANY, 
In  consideration  of  the  representations  made  to  them  in  the  ap- 
plication for  this  policy,  and  of  the  sum  of  thirty-four  dollars,  and 
the  further  sums  of  thirty-four  dollars  to  be  paid  on  the  27th  day  of 
January  and  July  of  each  year  during  the  continuance  of  this  pol- 
icy, do  insure  the  life  of  Jasper  N.  Gary,  of  Fort  Leavenworth,  in 
the  county  of  Leavenworth,  State  of  Kansas,  in  the  amount  of  one 
thousand  dollars  for  the  term  of  his  natural  life.  And  the  said  com- 
pany does  promise  and  agree  to  pay  the  amount  of  the  said  insur- 
ance at  its  office  in  St.  Louis  to  Jasper  N.  Gary's  legal  representa- 


Forms.  293 

lives,  in  sixty  days,  after  due  notice  and  satisfactory  proof  of  his 
death  during  the  continuance  of  this  policy. 

In  witness  whereof  the  said  Occident  Life  Insurance  Company 
has  by  its  president  and  actuary  signed  and  delivered  this  contract 
this  27th  day  of  July,  1881. 

ABIEL  WRIGHT,  JONATHAN  S.  WILLS, 

Actuary.  President. 

Premium  $34,  payable  semi-annually. 


FORM  30. 
GENERAL   ASSIGNMENT. 

Know  all  men  by  these  presents,  that  whereas  I,  James  S.  Fay, 
am  indebted  to  divers  persons  in  considerable  sums  of  money,  which 
I  am  at  present  unable  to  pay  in  full,  and  am  desirous  of  conveying 
all  my  property  for  the  benefit  of  my  creditors  . 

Now,  therefore,  I,  in  consideration  of  the  premises,  and  of  one 
dollar  to  me  paid  by  Samuel  Coe,  the  receipt  whereof  is  hereby 
acknowledged,  have  granted,  bargained,  sold,  assigned,  transferred, 
and  set  over,  and  by  these  presents  do  grant,  bargain,  sell,  assign, 
transfer,  and  set  over,  unto  the  said  Samuel  Coe,  all  my  property  01 
every  kind  and  description,  except  property  exempt  by  law  from 
execution;  to  have  and  to  ho'.d  the  same  unto  the  said  Samuel  Coe 
in  trust,  to  convert  the  same  into  money,  and  apply  the  proceeds  as 
follows : 

1.  To  pay  the  expenses  of  executing  this  trust; 

2.  To  pay  all  debts  which  I  may  be  owing,  provided  that  if  there 
be  not  sufficient  to  pay  all  my  creditors  in  full,  then  the  amount  is 
to  be'distributed  among  them  ratably  in  proportion  to  the  amounts 
of  their  several  debts; 

3.  The  residue,  if  there  be  any,  to  be  repaid  to  me,  or  my  execu- 
tors, administrators  or  assigns. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  seal  this  7th 
day  of  December,  1881. 

JAMES  S.  FAY.      [Seal.] 


294  Forms. 

FORM  31. 

POWER  OF  ATTORNEY. 

Know  all  men  by  these  presents,  that  we,  Archibald  Archibald 
and  Henry  S.  Archibald,  doing  business  as  Archibald  Brothers,  of 
New  York  City,  do  hereby  make,  constitute,  and  appoint  William 
J.  Kelly  of  Boston,  Mass.,  our  true,  sufficient,  and  lawful  attorney 
for  us  and  in  our  name,  to  conduct  and  carry  on  the  wholesale 
grocery  business  at  55  Washington  Street,  Boston,  Mass.,  now  estab- 
lished as  a  branch  of  our  New  York  store,  and  to  buy  and  sell  and 
receive  on  commission  all  such  goods  appertaining  to  the  grocery 
business  as  he  may  deem  proper,  and  to  do  and  perform  all  neces- 
sary acts  in  the  execution  and  prosecution  of  the  aforesaid  business 
in  as  full  and  ample  a  manner  as  we  might  do  were  we  personally 
present. 

A.  ARCHIBALD, 
HENRY  S.  ARCHIBALD. 

[This  form  grants  broad  powers  to  the  agent.  More  often  a  power  of  attor- 
ney will  limit  the  agent's  powers,  by  specifying  the  different  things  which  he 
shall  or  shall  not  have  power  to  do.  Of  course,  the  parties  may  make  as  full 
or  as  limited  a  power  as  they  choose.  Between  the  principal  and  agent  a  power 
is  a  contract.] 


FORM  32. 

RECEIPT  IN  FULL. 

ALBANY,  January  9,  1882. 

Received  of  Whitman,  Lawrence  &  Co.  twenty-five  and  ^fa  dol- 
lars in  full  of  account  to  date. 
$25.14. 

LONGMAN  &  GREEN. 

[The  above  receipt  is  an  acknowledgment  by  Longman  &  Green  that  Whit- 
man, Lawrence  &  Co.  owe  them  nothing.  If  something  still  remained  due,  if 
$23.14  was  only  a  partial  payment,  the  receipt  would  read  "on  account,"  instead 
of  "  in  full  of  account."  A  receipt  is  not  a  contract;  it  is  only  evidence.  Thus, 
if  a  receipt  should  happen  to  be  given  when  there  was  no  payment  really  ma'de 
it  would  have  no  effect.  The  debt  would  still  remain.  One  is  always  at  liberty 
U  prove  the  truth  in  spite  of  a  receipt.] 


Forms.  295 

FOEM  33. 

BILL  OF  SALE. 

Know  all  men  by  these  presents  that  we,  Charles  S.  Mead  and 
Gregory  Ross,  of  the  city  of  Brooklyn,  New  York,  in  consider- 
ation of  the  sum  of  five  thousand  dollars  to  us  paid  and  to  be  paid 
by  James  S.  Fay,  of  the  same  place,  as  follows,  viz. :  Two  thousand 
dollars  on  the  ensealing  and  delivery  of  this  bill  of  sale,  and  the 
remainder  in  equal  payments  of  one  thousand  dollars  each  on  the 
first  days  of  April,  June,  and  September,  1882.  respectively,  (the  said 
Fay  giving  herewith  his  three  notes  of  one  thousand  dollars  each, 
dated  respectively  on  those  days),  have  bargained,  sold,  granted,  and 
conveyed,  and  by  these  presents  do  bargain,  sell,  grant,  and  convey 
unto  the  said  James  S.  Fay,  his  executors,  administrators  and  assigns, 
all  the  goods,  wares  and  merchandise,  furniture  and  fixtures,  now 
in  the  dry  goods  store  No.  547  Fulton  Street,  Brooklyn,  and 
scheduled  in  the  inventory  hereto  annexed:  to  have  and  to  hold  the 
same  unto  the  said  James  S.  Fay,  his  executors,  administrators,  and 
assigns  forever.  And  we  do  for  ourselves,  our  heirs,  executors, 
administrators,  and  assigns,  covenant  and  agree,  to  warrant  and 
defend  the  said  described  goods  hereby  sold  unto  the  said  James  S. 
Fay,  his  executors,  administrators,  and  assigns,  against  all  and  every 
person  and  persons  whatsoever. 

In  witness  whereof,  we  have  hereunto  set  our  hands  this  1st  day 
of  February,  1883. 

CHARLES  S.  MEAD, 
GREGORY  Ross. 

lA  bill  of  sale  is  not  a  document  necessary  to  a  sale.  We  have  considered 
when  a  writing  is  necessary  to  a  sale  (pp.  36,  37).  But  a  bill  of  sale  is 
used  when  it  is  thought  best  to  have  some  formal  instrument  showing  the 
transfer,  as  where  one  sells  his  business  and  his  stock  in  trade  to  another.  The 
inventory  would  be  on  another  sheet,  would  enumerate  all  the  articles  intended 
to  be  transferred,  and  should  be  signed.] 


FORM  34. 
CHATTEL  MORTGAGE. 

Know  all  men  by  these  presents,  that  I,  Oliver  Ascham,  of  the 
city  of  New  York,  do  hereby  sell  and  assign  to  James  Ellsworth,  Jr., 


296  Forms. 

of  the  same  place,  all  the  tools  and  machinery  now  in  my  machine 
shop  on  West  Street,  enumerated  in  the  schedule  hereto  attached, 
and  made  a  part  hereof;  but  if  I  shall  on  or  before  the  expiration  of 
six  months  from  the  date  hereof  pay  unto  the  said  James  Ellsworth, 
Jr.,  the  sum  of  five  hundred  dollars  with  interest  at  six  per  cent  per 
annum,  then  this  conveyance  to  be  wholly  void,  it  being  intended 
merely  as  a  security  for  the  said  payment. 

NEW  YORK,  January  10th,  1882. 

OLIVER  ASCHAM. 

[The  above  is  a  short  form.  Longer  ones  are  often  used.  Notice  that  it  is 
the  same  as  a  bill  of  sale  trith  the  added  clause  showing  that  the  sale  is  not  a 
complete  one,  but  only  conditional.  The  property  does  not  become  Ellsworth's 
unless  Ascham  fails  to  pay  the  money  before  July  llth.] 


FORM  35. 

LETTER  OF  CREDIT. 

Office  of  O.  B.  S.  LONG  &  Co., 

No.  4562  Bankers, 

for  £3000. 

NEW  YORK,  January  25th,  1882. 
To  OUR  CORRESPONDENTS: 

Gentlemen: — We  beg  leave  to  introduce  to  you  Mr.  John  A. 
Sergeant  in  whose  favor  we  have  opened  a  credit  for  three  thousand 
pounds  sterling,  say  £3000. 

We  have  to  request  you  that  you  will  furnish  him  with  whatever 
funds  he  may  require  to  the  available  extent  of  this  credit  against 
his  drafts  at  3  days  sight  on  ourselves. 

All  drafts  so  negotiated  should  be  indorsed  on  this  credit,  which 
will  continue  in  force  until  July  1st,  1882. 

Requesting  for  Mr.  Sergeant  your  best  attention,  we  have  the 
honor  to  be,  Gentlemen, 

Your  obedient  servants, 

O.  B.  8.  LONG  &  Co. 
Signature  of  the  holder, 

JOHN  A.  SERGEANT. 

[This  is  sometimes  called  a  circular  letter.  The  "correspondents"  are  differ- 
ent  persons  or  firms  situated  at  different  places,  who  have  agreed  with  O.  B. 
S.  Long  &  Co.  to  advance  money  in  that  way.  The  operation  is  as  follows: 


Forms.  297 


Suppose  that  Mr.  Sergeant  wishes  to  travel  in  Europe  and  to  use  money  there ; 
he  will  go  to  some  firm  (Long  &  Co.)  issuing  European  letters  of  credit,  and  on 
depositing  his  money  with  them,  obtain  from  them  this  letter.  These  corre- 
spondents we  will  suppose  are  situated  one  at  London,  one  at  Paris,  one  at 
Vienna,  etc.,  etc.  If  in  any  one  of  those  places  he  desires  money,  he  will  draw 
his  own  draft  for  the  amount  needed  upon  O.  B.  S.  Long  &  Co.  in  favor  of  the 
correspondent  at  that  place,  and  that  correspondent  will  pay  him  the  money. 
The  amount  of  each  draft  when  drawn  is  indorsed  upon  the  letter,  and  when 
he  has  drawn  £3000  altogether  he  can  draw  no  more.  Thug,  a  letter  of  credit 
is  a  convenient  way  to  carry  money.] 


FORM  36. 

AFFIDAVIT. 

STATE  OP  MICHIGAN,  |      . 
COUNTY  OP  KENT.     \ 

James  P.  Longford,  being  duly  sworn,  deposes  and  says,  that  the 
account  hereto  annexed  is  in  every  respect  a  just,  full  and  true  state- 
ment of  the  account  existing  between  deponent  and  the  late  Caroline 
Smith  at  the  time  of  her  death,  and  that  the  sum  of  $45.26  appear- 
ing thereby  to  be  due  to  him  from  the  estate  of  the  said  Caroline 
Smith,  is  justly  and  fairly  due  to  him  from  the  said  estate  over  and 
above  all  set-offs,  counter-claims,  or  payments. 

JAMES  P.  LONGFORD. 
Sworn  to  before  me,  this  10th  ) 
day  of  February,  1882.          \ 
O.  P.  BARNES, 

Notary  Public  for  the  County  of  Kent. 

[An  affidavit  is  the  written  evidence  of  an  oath.  Occasions  sometimes  arise 
in  business  life  when  affidavits  are  required.  Thus,  if  Longford  had  sold  to 
Mrs.  Smith  during  her  lifetime  books  to  the  amount  stated  in  the  form,  the  ex- 
ecutor of  her  estate  might  require  a  sworn  statement  from  him  before  paying 
the  bill.  He  signs  the  affidavit  and  swears  before  the  notary  (Barnes)  that  it  is 
true,  and  the  notary  appends  his  signature.] 


FORM  37. 
GUARANTY  OF  NOTE. 

For  one  dollar  to  me  paid  I  hereby  guarantee  the  payment  of  this 

note. 

JOH:N  B.  AL:LAN. 

[Such  a  guaranty  would  be  written  on  the  guaranteed  note  itself.] 


298  Forms. 

FORM  38. 

DEED  OF  REAL  ESTATE  WITH  FULL  COVENANTS. 

[a]  THIS  INDENTURE,  made  the  15th  day  of  July  in  the  year  one 
thousand  eight  hundred  and  eighty -two,  between  James  K.  Robert- 
son, of  the  City,  County,  and  State  of  New  York,  and  Alice  B.,  his 
wife,  parties  of  the  first  part,  and  Elias  B.  Clarkson,  of  the  same 
place,  party  of  the  second  part,  WITNESSETH:  That  the  parties  of 
the  first  part,  in  consideration  of  the  sum  of  fifteen  thousand  dollars 
lawful  money  of  the  United  States,  to  them  in  hand  paid  b}'  the 
party  of  the  second  part,  at  or  before  the  ensealing  and  delivery 
of  these  presents,  the  receipt  whereof  is  hereby  acknowledged,  and 
the  said  party  of  the  second  part,  his  heirs,  executors,  and  adminis- 
trators, forever  released  and  discharged  from  the  same, 

[6]  HAVE  granted,  bargained,  sold,  aliened,  remised,  released, 
conveyed,  and  confirmed,  and  by  these  presents  do  grant,  bargain, 
sell,  alien,  remise,  release,  convey,  and  confirm  unto  the  said  party 
of  the  second  part  and  his  heirs  and  assigns  forever, 

[c]  ALL  that  certain  lot,  piece,  or  parcel  of  land  situated  in  the 
Eighth  Ward  of  the  City  of  New  York,  and  bounded  and  described 
as  follows:  Beginning  on  the  northerly  side  of  Maynard  Street  at  a 
point  forty  (40)  feet  easterly  from  the  northeasterly  corner  of  May- 
nard and  Alcove  Streets,  running  thence  northerly  on  a  line  parallel 
with  Alcove  Street,  and  part  of  the  way  through  the  center  of  a 
party-wall  eighty-eight  (88)  feet,  thence  easterly  parallel  with  May- 
nard Street  twenty  (20)  feet,  thence  southerly  parallel  with  Alcove 
Street,  and  part  of  the  way  through  a  party- wall,  eighty-eight  (88) 
feet  to  Maynard  Street,  and  thence  westerly  along  Maynard  Street 
twenty  (20)  feet  to  the  place  of  beginning,  being  the  premises  known 
as  No.  148  Maynard  Street, 

[d]  Together  with  all  and  singular  the  tenements,  hereditaments 
and  appurtenances  thereunto  belonging  or  in  any  wise  appertaining, 
and  the  reversion  and  reversions,  remainder  and  remainders,  rents, 
issues  and  profits  thereof;  and  also  all  the  estate,  right,  title,  interest, 
dower,  right  of  dower,  property,  possession,  claim  and  demand  what- 
soever, both  in  law  and  in  equity,  of  the  said  parties  of  the  first  part, 
of,  in  and  to  the  above-granted  premises,  and  every  part  and  parcel 
thereof,  with  the  appurtenances, 

[e]  To  have  and  to  hold  all  and  singular  the  above-granted  prem- 


Forms.  £99 


ises,  together  with  the  appurtenances  and  every  part  thereof,  unto 
the  said  party  of  the  second  part,  his  heirs  and  assigns  forever; 

ffj  And  the  said  James  K.  Robertson,  for  himself,  his  heirs,  ex- 
ecutors, and  administrators,  does  covenant,  promise  and  agree  to 
and  with  the  said  party  of  the  second  part,  his  heirs  and  assigns, 
that  the  said  James  K.  Robertson  at  the  time  of  the  sealing  and  de- 
livery of  these  presents,  is  lawfully  seized  in  his  own  right,  of  a 
good,  absolute  and  indefeasible  estate  of  inheritance  in  fee-simple, 
of  and  in  all  and  singular  the  above-granted  and  described  premises, 
with  the  appurtenances, 

[y]  And  has  good  right,  full  power  and  lawful  authority  to  grant, 
bargain,  sell  and  convey  the  same  in  manner  aforesaid; 

[h]  And  that  the  said  party  of  the  second  purt,  his  heirs  and  as- 
signs, shall  and  may  at  all  times  hereafter,  peaceably  and  quietly 
have,  hold,  use,  occupy,  possess  and  enjoy  the  above-granted  prem- 
ises, and  every  part  and  parcel  thereof  with  the  appurtenances, 
without  any  let,  suit,  trouble,  molestation,  eviction,  or  disturbance 
of  said  parties  of  the  first  part,  their  heirs  or  assigns,  or  of  any  other 
person  or  persons  lawfully  claiming  or  to  claim  the  same; 

[i]  And  that  the  same  now  are  free,  clear,  discharged  and  unin- 
cumbered  of  and  from  all  former  and  other  grants,  titles,  charges, 
estates,  judgments,  taxes,  assessments,  and  iucumbrances  of  what 
nature  or  kind  soever; 

[j]  And  also  that  the  said  parties  of  the  first  part,  and  their  heirs, 
and  all  and  every  other  person  or  persons  whosoever,  lawfully  or 
equitably  deriving  any  estate,  right,  title,  or  interest  of,  in  or  to  the 
above-granted  premises  by,  from,  under  or  in  trust  for  them,  shall 
and  will  at  any  time  or  times  hereafter,  upon  the  reasonable  request, 
and  at  the  proper  costs  and  charges  in  the  law,  of  the  said  party  of 
the  second  part,  his  heirs  and  assigns,  make,  do  and  execute,  or  cause 
or  procure  to  be  made,  done  and  executed,  all  and  every  such  further 
and  other  lawful  and  reasonable  acts,  conveyances  and  assurances 
in  the  law,  for  the  better  and  more  effectually  vesting  and  con- 
firming the  premises  hereby  granted  or  intended  so  to  be  in  and  to 
the  said  party  of  the  second  part,  his  heirs  or  assigns,  forever,  as  by 
the  said  party  of  the  second  part,  his  heirs  or  assigns,  or  his  or  their 
counsel  learned  in  the  law,  shall  be  reasonably  devised,  advised  or 
required ; 

[&]  And  the  said  James  K.  Robertson,  and  his  heirs,  the  above- 
described  and  hereby  granted  and  released  premises,  and  every  part 


300  Forms. 


and  parcel  thereof,  with  the  appurtenances,  unto  the  said  party  of 
the  second  part,  his  heirs  and  assigns,  against  the  said  parties  of 
the  first  part,  and  their  heirs,  and  against  all  and  every  person  and 
persons  whomsoever,  lawfully  claiming  or  to  claim  the  same,  shall 
and  will  warrant,  and  by  these  presents  forever  defend. 

In  witness  whereof  the  said  parties  of  the  first  part  have  hereunto 
set  their  hands  and  seals,  the  day  and  year  first  above  written. 

JAMES  K.  ROBERTSON,  [Seal.] 
ALICE  B.  ROBERTSON.  [Seal.] 
Signed,  sealed  and  delivered  ) 
in  presence  of  ) 

ALFRED  B.  ROBERTSON, 
JESSE  PRICE. 


FORM  39. 
COVENANT  AGAINST  NUISANCES. 

And  the  said  Elias  B.  Clarkson,  for  himself,  his  heirs  and  assigns, 
does  hereby  covenant  to  and  with  the  said  James  K.  Robertson,  his 
heirs,  executors  and  administrators,  that  neither  the  said  Clarkson, 
nor  his  heirs  or  assigns  shall  or  will  at  any  time  hereafter  erect  or 
permit  upon  any  part  of  the  said  lot  any  slaughter-house,  smith- 
shop,  forge,  furnace,  steam-engine,  brass-foundry,  nail  or  other  iron 
factory,  or  any  manufactory  of  gunpowder,  glue,  varnish,  vitriol, 
ink,  or  turpentine,  or  for  the  tanning,  dressing  or  preparing  skins, 
hides,  or  leather,  or  any  brewery,  distillery,  or  any  other  noxious 
or  dangerous  trade  or  business. 

[The  above  might  be  inserted  in  the  deed  in  form  38  as  a  part  of  it.  In  such 
case  Clarkson  ought  to  sign  the  deed.] 


FOKM  40. 
BOND. 

Know  all  men  by  these  presents,  that  I,  Elias  B.  Clarkson,  of  the 
city  of  New  York,  am  held  and  firmly  bound  unto  Alfred  Cornwell, 
of  Chicago,  111.,  in  the  sum  of  twenty  thousand  dollars  ($20,000) 
good  and  lawful  money  of  the  United  States,  to  be  paid  the  said 
Alfred  Cornwell,  his  executors,  administrators,  or  assigns,  for  which 


Forms.  301 

payment  well  and  truly  to  be  made  I  do  bind  myself,   my  heirs, 
executors,  and  administrators,  firmly  by  these  presents. 

Sealed  with  my  seal  and  dated  the  first  day  of  August,  1882. 

The  condition  of  this  obligation  is  such  that  if  the  above-bounden 
Elias  B.  Clarkson,  his  heirs,  executors,  and  administrators,  or  any 
of  them,  shall  well  and  truly  pay,  or  cause  to  be  paid  unto  the 
above-named  Alfred  Cornwell,  his  executors,  administrators,  or  ;is- 
signs,  the  just  and  full  sum  of  ten  thousand  dollars,  on  the  1st  day 
of  August,  which  will  be  in  the  year  one  thousand  eight  hundred 
and  eighty-seven,  and  interest  thereon  at  the  rate  of  six  per  cent 
per  annum,  payable  semi-annually  on  the  first  days  of  August  and 
February  in  each  year,  then  this  obligation  is  to  be  void,  otherwise 
to  remain  in  full  force  and  effect. 

And  it  is  hereby  expressly  agreed  that  should  any  default  be  made 
in  the  payment  of  the  said  interest  or  of  any  part  thereof,  on  any 
day  whereon  the  same  is  made  payable  as  above  expressed,  and 
should  the  same  remain  unpaid  and  in  arrear  for  the  space  of  thirty 
days,  then  and  from  thenceforth,  that  is  to  say,  after  the  lapse  of 
the  said  thirty  days,,  the  aforesaid  principal  sum  of  ten  thousand 
dollars  with  all  arrearage  of  interest  thereon,  shall,  at  the  option  of 
the  said  Alfred  Cornwell,  become  and  be  due  and  payable  immedi- 
ately thereafter,  although  the  period  above  limited  for  the  payment 
thereof  may  not  then  have  expired,  anything  herein  before  con- 
tained to  the  contrary  thereof  in  any  wise  notwithstanding. 

ELIAS  B.  CLABKSON. 


FOEM  41. 

MORTGAGE  OF  REAL  ESTATE. 

[a]  THIS  INDENTURE  made  the  1st  day  of  August  in  the  year  one 
thousand  eight  hundred  and  eighty-two,  between  Elias  B.  Clark- 
son,  of  the  City,  County,  and  State  of  New  York,  and  Charlotte, 
his  wife,  parties  of  the  first  part,  and  Alfred  Cornwell,  of  the  City 
of  Chicago,  County  of  Cook,  and  State  of  Illinois,  party  of  the  sec- 
ond part, 

Whereas  the  said  Elias  B.  Clarkson  is  justly  indebted  to  the 
said  party  of  the  second  part  in  the  sum  of  ten  thousand  (10,000) 
dollars,  lawful  money  of  the  United  States,  secured  to  be  paid  by 
his  certain  bond  or  obligation  bearing  even  date  with  these  pres- 


302  Forms. 

eats,  in  the  penal  sum  of  twenty  thousand  dollars  lawful  money  as 
aforesaid,  conditioned  for  the  payment  of  the  said  first  mentioned 
sum  of  ten  thousand  dollars  lawful  money  as  aforesaid,  to 
the  said  party  of  the  second  part,  his  executors,  administrators 
or  assigns,  on  the  1st  day  of  August,  which  will  be  in  the 
year  one  thousand  eight  hundred  and  eighty  seven,  and  interest 
thereon  to  be  computed  from  August  1,  1882,  at  and  after  the  rate 
of  six  per  cent  per  annum,  to  be  paid  semi-aunually  on  the  first 
days  of  February  and  August  in  each  year;  and  it  is  thereby 
expressly  agreed  that  should  any  default  be  made  in  the  payment 
of  the  said  interest,  or  of  any  part  thereof,  on  any  day  whereon 
the  same  is  made  payable  as  above  expressed,  and  should  the  said 
interest  remain  unpaid  and  in  arrear  for  the  space  of  thirty  days, 
then  and  from  thenceforth,  that  is  to  say,  after  the  lapse  of  the  said 
thirty  days,  the  aforesaid  principal  sum,  with  all  arrearage  of  interest 
thereon,  shall,  at  the  option  of  the  said  party  of  the  second  part,  his 
administrators  or  assigns,  become  and  be  due  and  payable  imme- 
diately thereafter,  although  the  period  above  limited  for  the  pay- 
ment thereof  may  not  then  have  expired,  anything  thereinbefore 
contained  to  the  contrary  thereof  in  any  wise  notwithstanding;  As 
by  the  said  bond  or  obligation,  and  the  conditions  thereof,  refer- 
ence being  thereunto  had,  may  more  fully  appear, 

Now  this  indenture  WITNESSETH  that  the  said  parties  of  the  first 
part  for  the  better  securing  the  payment  of  the  said  sum  of  money 
mentioned  in  the  condition  of  the  said  bond  or  obligation,  with  interest 
thereon,  according  to  the  true  intent  and  meaning  thereof,  and  also  for 
and  in  consideration  of  the  sum  of  one  dollar  to  them  in  hand  paid 
by  the  said  party  of  the  second  part,  at  or  before  the  ensealing  and  de- 
livery of  these  presents,  the  receipt  whereof  is  hereby  acknowledged, 

[b]  HAVE  granted,  bargained,  sold,  aliened,  remised,  released, 
conveyed  and  confirmed,  and  by  these  presents  do  grant,  bargain, 
sell,  alien,  remise,  release,  convey  and  confirm  unto  the  said  party 
of  the  second  part,  and  to  his  heirs  and  assigns  forever, 

[e]  ALL  that  certain  lot,  piece  or  parcel  of  land  situated  in  the 
Eighth  Ward  of  the  City  of  New  York,  and  bounded  and  described 
as  follows:  Beginning  on  the  northerly  side  of  Maynard  Street  at  a 
point  forty  (40)  feet  easterly  from  the  northeasterly  corner  of  May- 
nard  and  Alcove  Streets,  running  thence  northerly  on  a  line  parallel 
•with  Alcove  Street,  and  part  of  the  way  through  the  center  of  a  par- 
ty-wall eighty-eight  (88)  feet,  thence  easterly,  parallel  with  Maynard 


Forms.  303 

Street  twenty  (20)  feet,  thence  southerly  parallel  with  Alcove  Street 
and  part  of  the  way  through  a  party-wall,  eighty-eight  (88)  feet  to 
Maynard  Street,  and  thence  westerly  along  Maynard  Street  twenty 
(20)  feet  to  the  place  of  beginning,  being  the  premises  known  as  No. 
148  Maynard  Street, 

[d]  Together  with  all  and  singular  the  tenements,  hereditaments 
and  appurtenances  thereunto  belonging,  or  in  any  wise  appertaining, 
and  the  reversion,  and  reversions,  remainder  and  remainders,  rents, 
issues  and  profits  thereof;  and  also  all  the  estate,  right,  title,  in- 
terest, dower,  right  of  dower,  property,  possession,  claim  and  de- 
mand whatsoever,  as  well  in  law  as  in  equity,  of  the  said  parties  of 
the  first  part,  of,  in  and  to  the  same,  and  every  part  and  parcel 
thereof  with  the  appurtenances; 

[e]  To  have  and  to  hold  the  above-granted,   bargained  and  de- 
scribed premises,  with  the  appurtenances,  unto  the  said  party  of  the 
second  part,  his  heirs  and  assigns,  to  his  or  their  own  proper  use, 
benefit  and  behoof  forever; 

[/J  Provided  always,  and  these  presents  are  upon  this  express  con- 
dition, that  if  the  said  parties  of  the  first  part,  their  heirs,  executors, 
administrators,  shall  well  and  truly  pay  unto  the  said  party  of  the 
second  part,  his  executors,  administrators  or  assigns,  the  said  sum  of 
money  mentioned  in  the  condition  of  the  said  bond  or  obligation, 
and  the  interest  thereon,  at  the  times  and  in  the  manner  mentioned 
in  the  said  condition,  according  to  the  true  intent  and  meaning 
thereof,  that  then  these  presents,  and  the  estate  hereby  granted, 
shall  cease,  determine  and  be  void 

[g]  And  the  said  Elias  B.  Clarkson,  for  himself,  his  heirs,  execu- 
tors and  administrators,  does  covenant  and  agree  to  pay  unto  the  said 
party  of  the  second  part,  his  executors,  administrators  or  assigns, 
the  said  sum  of  money  and  interest  as  mentioned  above,  and  ex- 
pressed in  the  condition  of  the  said  bond.  And  if  default  shall  be 
made  in  the  payment  of  the  said  sum  of  money  above-mentioned,  or 
the  interest  that  may  grow  due  thereon,  or  of  any  part  thereof,  that 
then  and  from  thenceforth  it  shall  be  lawful  for  the  said  party  of  the 
second  part,  his  executors,  administrators  and  assigns,  to  enter  into 
and  upon  all  and  singular  the  premises  hereby  granted  or  intended 
so  to  be;  and  to  sell  and  dispose  of  the  same,  and  all  benefit  and 
equity  of  redemption  of  the  said  parties  of  the  first  part,  their  heirs, 
executors,  administrators  or  assigns,  therein,  at  public  auction  ac- 
cording to  the  act  in  such  case  made  and  provided. 


304  Forms. 

[h]  And  as  the  attorney  of  the  said  parties  of  the  first  part  for 
that  purpose  by  these  presents  duly  authorized,  constituted  and  ap- 
pointed, to  make  and  deliver  to  the  purchaser  or  purchasers  thereof, 
a  good  and  sufficient  deed  or  deeds  of  conveyance  in  the  law  for  the 
same,  in  fee-simple,  and  out  of  the  money  arising  from  such  sale,  to 
retain  the  principal  and  interest  which  shall  then  be  due  on  the  said 
bond  or  obligation,  together  with  the  costs  and  charges  of  adver- 
tisement and  sale  of  the  said  premises,  rendering  the  overplus  of  the 
purchase  money  (if  any  there  shall  be)  unto  the  said  Elias  B.  Clark- 
son,  of  the  first  part,  his  heirs,  executors,  administrators  or  assigns, 
which  sale  so  to  be  made  shall  forever  be  a  perpetual  bar,  both  in 
law  and  equity,  against  the  said  parties  of  the  first  part,  their  heirs 
and  assigns,  and  all  other  persons  claiming  or  to  claim  the  premises 
or  any  part  thereof,  by,  from,  or  under  them,  or  either  of  them. 

[{]  And  it  is  expressly  agreed  by  and  between  the  parties  to  these 
presents,  that  the  said  parties  of  the  first  part  shall  and  will  keep  the 
buildings  erected  and  to  be  erected  upon  the  lands  above  conveyed 
insured  against  loss  and  damage  by  fire,  by  insurers,  and  in  an 
amount,  approved  by  the  said  party  of  the  second  part,  and  assign 
the  policy  and  certificates  thereof  to  the  said  party  of  the  second 
part;  and  in  default  thereof,  it  shall  be  lawful  for  the  said  party  of 
the  second  part  to  effect  such  insurance,  and  the  premium  and 
premiums  paid  for  effecting  the  same  shall  be  a  lien  on  the  said 
mortgaged  premises,  added  to  the  amount  of  the  said  bond  or  obli- 
gation, and  secured  by  these  presents  and  payable  on  demand  with 
interest  at  the  rate  of  six  per  cent  per  annum. 

In  witness  whereof  the  said  parties  of  the  first  part  have  here- 
unto set  their  hands  and  seals  the  day  and  year  first  above  written. 

E.  B.  CLARKSON,  [Seal.] 
CHARLOTTE  CLARKSON.  [Seal.] 
Sealed  and  delivered  in  the 

presence  of 

REUBEN  CHAPIN, 
8.  T.  JOLLY. 


Forms.  305 

FORM  42. 

CERTIFICATE  OF  ACKNOWLEDGMENT. 

State  of  New  York,  City  and  County  of  New  York,  ss: 

On  this  1st  day  of  August,  1882,  before  me  personally  came  Elias 
B.  Clarkson  and  Charlotte  Clarkson,  his  wife,  to  me  known  to  be 
the  individuals  described  in,  and  who  executed  the  within  convey- 
ance, and  severally  acknowledged  that  they  executed  the  same  for 
the  purposes  therein  mentioned.  And  the  said  Charlotte  Clarkson 
on  a  private  examination  by  me  made,  apart  from  her  husband,  ac- 
knowledged that  she  executed  the  same  freely,  and  without  any  fear 
or  compulsion  of  her  said  husband. 

ALOYSITJS  MANWARING, 

Notary  Public, 
for  the  City  and  County  of  New  York. 


FORM  43. 

CERTIFICATE  OF  PROOF  BY  SUBSCRIBING  WITNESS. 

City  and  County  of  New  York,  ss. : 

On  this  3d  day  of  August,  in  the  year  1882,  before  me  personally 
came  S.  T.  Jolly,  a  subscribing  witness  to  the  within  instrument, 
with  whom  I  am  personally  acquainted,  who  "being  by  me  duly 
sworn,  said  that  he  resided  in  the  city  of  Newark,  in  the  State  of 
New  Jersey;  that  he  was  acquainted  with  Elias  B.  and  Charlotte 
CiarKson,  and  knew  them  to  be  the  persons  described  in,  and  who 
executed  the  said  instrument;  and  that  he  saw  them  execute  and 
deliver  the  same,  and  that  they  acknowledged  to  him  (the  said  Jolly), 
that  they  executed  and  delivered  the  same,  and  that  he  (the  said 
Jolly),  thereupon  subscribed  his  name  as  a  witness  thereto  at  their 
request 

ALOYSIUS  MANWARING, 

Notary  Public, 
for  the  City  and  County  of  New  York. 


306  Forms. 

FOKM  44. 

LEASE. 

This  Indenture,  made  the  21st  day  of  April,  in  the  year  one 
thousand  eight  hundred  and  eighty -three,  between  Elias  B.  Clarkson, 
of  New  York,  of  the  first  part,  and  Homer  B.  Abner,  of  the  same 
place,  of  the  second  part,  witnesseth:  That  the  party  of  the  first 
part  has  hereby  let  and  rented  to  the  party  of  the  second  part,  and 
the  party  of  the  second  part  has  hereby  hired  and  taken  from  the 
party  of  the  first  part,  the  ground  floor,  cellar,  and  second  story  of 
the  premises  known  as  148  Maynard  Street,  in  the  City  of  New  York, 
with  the  appurtenances,  for  the  term  of  three  years,  to  commence 
the  1st  day  of  May,  1888,  at  the  yearly  rent  of  eleven  hundred 
dollars  ($1100),  payable  in  equal  quarterly  payments  on  the  usual 
quarter  days  in  each  year. 

And  it  is  agreed  that  if  any  rent  shall  be  due  and  unpaid,  or  if 
default  shall  be  made  in  any  of  the  covenants  herein  contained,  then 
it  shall  be  lawf u-1  for  the  said  party  of  the  first  part  to  re-enter  the 
said  premises,  and  to  remove  all  persons  therefrom. 

And  the  said  party  of  second  part  covenants  to  pay  to  the  said 
party  of  the  first  part  the  said  rent,  as  herein  specified,  and  that  at 
the  expiration  of  the  said  term,  or  other  determination  of  this  lease, 
the  said  party  of  the  second  part  will  quit  and  surrender  the  premises 
hereby  demised  in  as  good  state  and  condition  as  reasonable  use  and 
wear  thereof  will  permit,  damages  by  the  elements  excepted;  and 
the  said  party  of  the  first  part  covenants  that  the  said  party  of  the 
second  part,  on  paying  the  said  yearly  rent,  and  performing  tb-s 
covenants  aforesaid,  shall  and  may  peaceably  and  quietly  have,  hoiu. 
and  enjoy  the  said  demised  premises  for  the  term  aforesaid. 

In  witness  whereof,  the  parties  hereto  have  hereunto  interchange 
ably  set  their  hands. 

E.  B.  CLARKSON, 
H.  B.  ABNER. 


INDEX. 


PAGE 

Abandonment  (in  insurance), 

176,  265 
Acceptance  (of  draft), 

definition 255 

effect  of 121, 129 

forgery  of 143 

form  of 119,  279 

Acceptance  of  offer 29-32 

Acceptor, 

definition 119,  268 

responsibility  of 120,  121,  133 

Accommodation  Draft 123,  255 

Accommodation  Indorsement.  134,  255 

Accommodation  Note 110,  255 

Accommodation  Paper 255 

Acknowledgment  (of  deed,  etc.), 

222,  234,  255 

form  of 305 

Advances  (by  commission  merchant), 
98,256 

Affidavit,  form  of. 297 

Agency 48-60,  256 

Agent, 

definition 48,256 

who  may  be 49 

appointment  of 49 

authority  of 50,  53 

right  of 53 

responsibility  of 54-57,  59 

fraud  of 56 

Agreement 17 

Agreement  to  sell 86,  92,  271 

Apparent  Authority 52,  256 

Appurtenance, 

definition 215,  256 

kinds  of 215,  217 


PAGE 

how  acquired 218 

need  not  be  named  in  deed  — 218 

Articles  of  Association 71,  260 

Articles  of  Copartnership 61,  268 

form  of 285 

Articles  of  Incorporation 71,  260 

Assent  (in  contracts) 22,  29-32 

Assignee 197,  257 

Assignment  (of  debt) 91, 25& 

Assignment  (of  lease) 237,  265 

Assignment,    General.     See  General 
Assignment. 

Assuming  Mortgage 22!> 

Assure 166,  256 

Attorney 256 

Authority  (in  agency) 60,  53, 256 

Average 164,  264 

Bank  Bill.   80,  145,  266 

Bank  Note 257 

Banking  183-185 

what  it  is 183 

deposit 184 

discount 184 

Bankruptcy 197-199, 257 

Barter 91,  271 

Bearer  Note 107 

Bill  and  Note  Broker 99,  257 

Bill  of  Exchange 117,  259 

form  of 279 

See  also  Draft. 

BUI  of  Lading ..161,163,257 

form  of 288 

Bill  of  Sale,  form  of 895 

Blank  Indorsement 114,  263 

Boarding- House 187 


308 


Index. 


PAGE 

Bond  (with  mortgage) 225,  257 

form  of 300 

Bond  of  Indemnity 76,  257 

form  of 286 

Broker, 

definition 99,  257 

kinds  of 99 

responsibility  of 100 

relation  to  third  party 100 

Broker's  Notes 99 

form  of .". .  .287 

Broker,  Sale  by 38, 99 

Business  Paper 255 

Capital  (of  firm) 60,268 

Capital  (of  corporation) 71,  260 

Capital  Stock 71,260 

Capture  (in  insurance) 171 

Care  (of  others'  property) 156 

Carrier 159,258 

See  also  Transportation. 

Cash 145 

Certificate  of  Deposit 129,  259 

form  of 281 

Certificate  of  Insurance,  form  of. .  .292 

Certificate  of  Stock 71,  260 

form  of 286 

Certification  (of  check) 128,  258 

forgery  of 143 

formof 280 

Charter  (of  corporation) 71,  261 

Charter  (of  vessel) 162,  258 

Charter-Party 162, 258 

formof 288 

Chattel 183,259 

Chattel  Mortgage 183,  226,  259 

formof 295 

Check, 

definition 126,  259 

formof 126,280 

use  of 126 

likeness  to  draft 127 

difference  from  draft.. 127,  128,  136 

certification  of 128 

negotiability 129 

stamp 129 

stopping  payment  of 127 

Circular  letter,  form  of 296 

Civil  Remedy 41,270 


PAGE 

Coin 145,266 

Collateral 181,  269 

Commercial  Paper 105-155,  259 

kinds  of 105 

transfer  of 114 

protest... 138, 140 

forgery  of 142 

See  also  Note,  Draft,  Check. 

Commission 96, 97, 259 

Commission  Merchant 96-98 

definition 96, 259 

duties  of 96 

powers  of 97 

responsibility  of. 97 

compensation  of 97 

advances  by 98 

lien  of 96 

Commissioner  of  Deeds 223 

Common  Carrier 159, 162,  258 

Common  Law 13,  265 

Company 259 

See  Corporation. 

Compounding  a  felony 26 

Compromise  (of  debts) 199,  257 

Conditional  Sale 87,  271 

Congress,  Laws  of 13, 15 

Consideration  (of  contracts), 

22,32-34,260 

Consignee 163,  260 

Consignor 163,  260 

Constitution, 

definition  265 

of  State 12 

of  Nation 13 

Contract 17-48 

definition 17,260 

kinds  of 19 

requisites  of 20-24,40 

freedom  to  make 18 

who  may  make 18,  27-29 

binding  force 18 

Copartnership 260 

See  Partnership. 

Copyright 193,  194,  196 

definition 193.  260 

object  of 193 

how  obtained 193 

duration 193 

infringement  of 194 


Index. 


309 


PAGE 

Corporation 70-75 

definition 70,200 

purpose  of 73 

formation  of 71 

management  of 72 

officers 72 

powers  of 27,  72 

dissolution  of 73 

compared  with  partnership 75 

Covenant   (in  deed).  ... 223,261 

form  of 299,  300 

Credit 91,  261 

Criminal  Remedy 41,  270 

Currency 145,  266 

Custom  (effect  on  contracts)  . .  .31,  236 

Damages 41,  270 

Days  of  Grace 107,  119, 128,  261 

Deceit 34 

Deed 219,  225 

definition 219,  261 

contents  of 219,  221,  223 

execution  of 221,  222 

acknowledgment  of 222,  234 

recording  of 231 

form  of 298 

Delivery  (of  contract) 31 

Delivery  (of  deed) 222 

Delivery  (of  goods  sold) 37,  93,  94 

Demand  of  payment.  .135,  136,  140,  141 

Demand  Note 107,  261 

Deposit  (in  bank) 184,  261 

Depositor 184 

Description  (in  deed) 221 

Destruction  of  Property.    See  Loss. 

Deviation  (in  insurance).   173,  265 

Differences  between  laws  of  different 
States, 

as  to  commercial  paper 124 

as  to  real  estate 214 

Director 72 

Discharge  (from  debt) 198 

Discharge  (of  employ^) 158 

Discount 184,  261 

Dishonor  (of  commercial  paper), 

121,  261 

Dispatch , 189 

Dissolution  (of  corporation) 73 

Dissolution  (of  firm) 62 


PAGB 

Distress  for  rent 238,261 

Dower 212,  261 

Draft 117-126 

definition 117,  259 

form  of 117,  278,  279 

use  of 118 

kinds  of 118 

when  due 119 

acceptance  of 119 

transfer  of 120 

negotiability 121 

accommodation  draft 123 

Drawer, 

of  draft 117,  267 

of  check 126, 267 

responsibility  of 120, 133 

Drawing  on  goods 98 

Earn  (in  insurance) 172,  264 

Employer  and  Employ 6. 155-159 

Endorse.    See  Indorse. 
Endorsement.    See  Indorsement. 

Eviction  (from  land) 240,  261 

Exchange 861 

Execution  (writ  of) 41,  270 

Express  Contract 19,  261 

Factor 96,  262 

Failure 64,  257 

Fee-simple 210,  262 

Fire  Insurance 165-170 

definition 166,264 

the  contract 166 

its  duration 166 

what  losses  insured  against — 166 

change  of  ownership 167 

change  of  risk 167 

amount 168 

hi  several  companies 168 

full  insurance 168 

misrepresentation 169 

Firm 60,  268 

Foreclosure 227,  262 

Forgery 142,  262 

of  indorsement Ill 

Found  Property 89,  90,  111 

Fraud 22,34-36,262 

by  agent 56 

Freight 160,  262 


Index. 


PAGE 

Full  Indorsement 114,  263 

Full  Insurance 168, 174,  264 

Future  Ownership  (of  real  estate).  .212 

General  Assignment, 

definition 197,  257 

assignee's  duties 198 

preference  in 198 

form  of 293 

General  Average ,164, 172,  262,  264 

General  Partner 66,  268 

Gift 32 

Gratuitous  Services 20 

Greenback 145,  267 

Guarantee 76-78,  262 

in  a  sale 95 

Guarantor 76,  262 

Guaranty 76-78,  262 

must  be  written 37,  77 

consideration  for 33,  76 

by  commission  merchant 97 

form  of 297 

Guaranty  Commission 97,  263 

Highway, 

definition 263 

rights  of  adjoining  owner 216 

Hiring,  Contract  of 155 

Holiday 107 

Hotel  Keeper 185-187 

definition 186,263 

obligation  to  receive 186 

lien  of 186 

responsibility 186 

boarding-house • 187 

House  (partnership) 60,  268 

Idiot 21,  28,  49,  266 

Ignorance  of  Law 14 

Illegal  Consideration 26,  34 

Illegal  Contract 21,  24 

Implied  Contract 19,  260 

Impossible  Contract 20 

Imprisonment  for  Debt 42 

Improvements  (upon  land) 215,  239 

Indemnity  Bond 76,  257 

form  of 286 

Indorsement, 

definition 114,  263 


PAGE 

kinds  of 114,  134 

two  purposes  of 132 

effect  of 133 

negotiability 134 

forgery  of Ill 

forms  of 282-284 

Indorser, 

definition 268 

responsibility  of 132-142 

notice  to 136, 137 

Infant.    See  Minor. 

Infringement 192,  194,  195,  263 

Injunction 42,  271 

Injury  to  Property.    See  Loss. 

Innkeeper 185 

Insolvency 197-199,  263 

Insurance 165-179,  264 

See  Fire,  Marine,  and  Life  Insur- 
ance. 

Insurance  Broker 100,  167,  258 

Insured 166,  264 

Insurer 166,  264 

Interest, 

definition 179,  269 

when  allowed 179 

legal  rate 180 

usury 24,180 

Joint  Ownership 213 

Judgment 41,  270 

alien 230 

Labor,  Agreements  for 155-159 

Landlord 235,  265 

Landlord  and  Tenant 235-241 

nature  of  the  relation <r35 

how  formed 235 

duration 236 

lease 236 

rent 236 

sale  of  property 236 

assignment  by  tenant 237 

distress  238 

destruction  of  property 238 

repairs 238 

improvements 239 

notice  to  quit 239 

eviction 240 

recovery  of  property 240 


Index. 


311 


PAGE 

Law, 

definition 11,265 

sources  of 12 

difference  among  the  States — 

14,  124,214 

Lease 236,265 

form  of 306 

Legal  Holidays 107,  266 

Legal  Rate  of  Interest  179,269 

Legal  Tender 146,  266 

Legislature 13,  265 

Letter,  Contract  by 30,  39 

Letter  of  Credit,  form  of 296 

Letters  Patent  191,  269 

Liability  51,  266 

Lien, 

definition 230,266 

kinds  of. . .  .93,  98,  157,  161,  181,  186, 
188,229 

Life  Insurance 177-179 

definition 177,  264 

how  made 177 

its  object 177 

who  may  insure 178 

payment  of  premium 178 

assignment  of  policy 178 

misrepresentation 178 

Life  Ownership 211 

Limitation  (of  time  to  sue) 78-81 

Limited  Partnership 66,  268 

Loss  (of  property  belonging  to  one 
while  in  the  hands  of  another), 

157,  161,  163,  186,  238 

Loss  (of  negotiable  paper) 89,  111 

Louisiana,  Origin  of  Law  of 14 

Lunatic 21,  28,  49,  266 

Maker  (of  note) 106,  267 

responsibility  of 107, 133 

Marine  Insurance 170-177 

definition 170,  264 

the  contract 170 

duration 171 

the  perils  insured  against 171 

change  of  ownership 172 

deviation 173 

the  amount 173 

in  several  companies 174 

misrepresentation 175 


PAGE 

seaworthiness 175 

abandonment 176 

Married  Women, 

contracts  by 21,  29 

as  agents 29,  49 

as  partners 61 

Maturity  (of  com.  paper) 107,  266 

Merchandise  Broker 99,  258 

Minor, 

definition 27,  266 

contract  by 21,  27 

as  agent 29,  49 

Mistake  (in  contract) 31 

Mistake,  Payment  by 148 

Modification  of  Contract 19 

Money 145,146 

definition 145,  266 

kinds  of 145 

legal  tender 146 

Mortgage 225-231 

definition 225,  267 

contents  of 226 

form  of 301 

foreclosure  of 227 

transfer  of 228 

assuming 229 

recording  of 231 

priority  of  lien 229,  237 

chattel  mortgage 183,226 

Mortgagee 225,  267 

Mortgagor 225,  267 

Necessaries  (minors) 27,  267 

Negotiability 107-117 

definition 109, 267 

of  note 107-109 

of  draft 121 

of  check 129 

of  indorsement 134 

conditions  of.    See  below. 
effect  of.    See  below. 
Negotiability,  Conditions  of, 

111-117,  130 
as  to  form, 

date  of  payment 112 

negotiable  words 112 

certainty  in  amount 113 

payable  in  money 113 

unconditionally 113 


312 


Index. 


PAGE 

as  to  indorsement 114 

as  to  time  of  receipt    115 

consideration 115 

•  good  faith 116 

Negotiability,  Effect  of, 

accommodationpaper.no,  123,  134 

prior  payment 110 

set-off 110 

lost  or  stolen  paper Ill 

Negotiable  Note 109,  111-117,  267 

Negotiable  Paper 89, 130 

Negotiable  Securities 89, 267 

Negotiable  Words 112 

Non-acceptance 120, 267 

notice  of 136 

Notary  Public 138,  233 

Note 105-117 

definition 105,  259 

form  of 105,  275-277 

use  of 106 

kinds  of 106 

when  due 107 

transfer  of 108 

negotiability 107-111 

Notice, 

to  indorser 136,  137,  140,  141 

form  of 285 

to  quit 239,  267 

to  surety 77 

of  insurance  loss 170 

of  retiring  of  partner 66 

Offer  and  Acceptance. 29-32 

Offset.    See  Set-off. 

Open  Policy 171,  264 

Oral  Contract 19 

Order  Note 107 

Outlawed 79,  267 

Ownership  (of  real  estate), 

full  ownership 210 

life  ownership 211 

future  ownership 212 

joint  ownership 212 

trust 213 

Paper  Money 145 

Par 267 

Particular  Average 164,  265 

Partner, 

definition 60. 268 

who  may  be 60 


PAGE 

what  makes  one 60 

death  of 62 

right  of 63,  64 

authority  of 63-65 

responsibility  for  debts 64,  65 

general  partner 66 

special  partner 66 

Partnership 60-70 

definition 60,  268 

formation  of 61,  69 

duration  of 61,  -69 

effect  of  dissolution 62,  65 

transfer  of  interest 62 

death  of  partner 62 

debts  of 64 

notice  of  dissolution 66 

compared  with  corporation 75 

Party- Wall 217,  268 

Par  Value 260 

Patent 190-193,  196 

definition 190,  268 

how  obtained 191 

duration  of. 191 

infringement  of 192 

Pawn 181,269 

Pawnbroker 182, 269 

Payee, 

of  note 106,  268 

of  draft 1 117,  268 

of  check 126, 268 

Payment, 

for  goods  sold .  .37, 87 

of  negotiable  paper 110 

under  mistake 143 

Per  cent 179 

Performance 23 

Perils  of  the  Sea 163,  171,  269 

Personal  Property 33,  209,  270 

Pledge  181,  225,  269 

Pledging  of  Property 181-1&3 

what  it  is 181 

creditor's  rights 181 

debtor's  rights 182 

negotiable  paper 182 

chattel  mortgage 183 

Policy  (of  insurance)...  166,  170, 177,  264 

forms  of 289-293 

Power  of  Attorney 50,  256 

form  of  294 

Preference  (in  assignment)  — 198,  257 


Index. 


313 


PAGE     . 

Premium  (in  insurance) 166, 264 

Premium  Note 170,  264 

Presentment  for  Payment.  135,  140,  141 

Price 91,  270 

Primary  Liability 76 

Principal  (agency), 

definition 48,  256 

who  may  be 49 

responsibility  of 51-54, .  59 

Principal  (interest) 179,  269 

Principal  (suretyship) 76,  269 

Principal  Debtor 76,  121 

Private  Carrier 159,  258 

Private  Road 217,  263 

Promise 17 

Promissory  Note 105,  270 

Proof  of  Deed 234 

form  of 305 

Protest 138,  270 

Public  Agent 56, 270 

Public-House 185 

Ratification  (agency) 53,  270 

Ratification  (by  minor) 28,  270 

Real  Estate 33,  209-241,  270 

kinds  of  ownership 209-214 

rights  of  ownership 214-219 

deeds  of.'. 219-225 

mortgages  of 225-231 

recording 231-235 

landlord  and  tenant 235-241 

Real  Estate  Broker 99,258 

Real  Property 209,  270 

Receipt 161,  270 

form  of 294 

Receiver  (of  corporation) 73,  261 

Recording  (of  deeds,  etc.).. 231-235,  270 

object  of 231 

effect  of  not  recording 232,  235 

Redeem  (pledge) 182,  270 

Re-enter 240 

Release 199 

Remedy, 

definition 270 

kinds  of 41 

insufficiency  of 42 

Renewal  (insurance) 166 

orm  of 290 

Rent 236,  271    » 

Repairs  (to  rented  property) 238    j 


PAGE 

Responsibility 51,  271 

Revenue  Law 25,271 

Revocation  (agency) 50 

Right  and  Authority 53,  64 

.Right  of  Way 217,  271 

River,  Right  of  ad  joining  owner 216 

Sale  (of  personal  property) , 

36.  86-105 

definition 86, 271 

when  complete 87 

when  writing  necessary 36 

requisites  of.    See  below. 
incidents  of.    See  below. 

by  commission  merchant 96-99 

by  broker  38,  99 

on  credit 91 

of  debts 91,  131 

of  mortgage 228 

of  forged  paper 144 

fraudulent 35 

Sale,  Incidents  of 93-96 

delivery 93 

seller's  lien 93 

right  of  stoppage 94 

warranty 95 

Sale,  Requisites  of 86-93 

existence  of  property 88 

ownership  by  seller 89 

money  and  negotiable  securities.89 

property  must  be  specified 90 

price 91 

Sale  (of  real  estate) 219-225 

Salvage 165,  271 

Seal 34,  222 

Searching  a  title 231,  271 

Seaworthy 175,  271 

Secondary  Liability 76 

Secret  Partner 64,  268 

Security 181, 271 

Servant  155-159 

Services.  Agreement  for 155-159 

Set-off 91,  110,  271 

Shareholder 260 

Ship  Broker 258 

Shipper 162.  272 

Shipping 162-165 

bill  of  lading 163 

loss  of  goods 163 

general  average 164 


314 


Index. 


PAGE 

salvage 165 

Sight  Draft 119,  272 

Signing, 

of  contracts 38 

of  deeds 221 

Skill  (of  workmen) 157 

Smuggling 21 

Special  Partner 66,  268 

Stamp  (on  check) 129 

State  Law, 

relation  to  National  law 13 

differences  among  States, 

14, 124,  214 

Statute 13,  265 

Stock 71,209,260 

Stock  Broker 100,  258 

Stockholder 71,  260 

liability  for  debts 73 

Stolen  Property,  Sale  of 89,  90 

StolenNotes .' Ill 

Stop  Payment  of  Check 127, 272 

Stoppage,  Right  of 94 

Stream,  Right  of  adjoining  owner.216 
Street,  Right  of  adjoining  owner.  ..216 

Sub-agent  50,  256 

Sublease 237,265 

Subtenant 237,  265 

Sue 41,  78 

Sunday  (contracts) 25 

Surety, 

definition 76, 270 

change  of  primary  liability 77 

notice  to 77 

several  sureties 78 

claim  on  principal 78 

indorser  a  surety 120 

Suretyship 76-78,  272 

Tavern-keeper 185 

Taxes  (on  real  estate), 

who  *o  pay  them 212 

a  lien 230 

Telegraphs 189,  190 

the  contract 189 

responsibility  for  mistake 189 

accuracy 190 

promptness 190 

secrecy 190 

Tenant 235,  265 

See  also  Landlord  and  Tenant. 


PAGE 

Third  Party 49,  56,  64,  256,  272 

Time  Draft 118,  272 

Time  to  Sue 78-81 

effect  of  part-payment 80 

effect  of  new  promise 80 

Title 86,  272 

Trade,  Restraint  of 25 

Trade-Mark 194-1% 

definition 194,  272 

how  acquired  195 

duration  of  right 195 

infringement  of 195 

Transfer.    See  Sale. 

Transportation 159-162 

obligation  to  take 159 

compensation 160 

who  responsible  for  freight  — 160 

lien 161 

loss  of  goods 161 

See  also  Shipping. 

Trust 213,  272 

Trustee 72,  197,  213,  272 

Underlease 237,  266 

Undertenant 237,  265 

Underwriter 166,  264 

Uniformity  (in  law  of  States) 14 

United  States  Note 145,  266 

Usury 24,  180,  269 

Value 271 

Value  Received 106 

Valued  Policy 175,  264 

War,  Effect  of,  on  contracts 26 

Warranty  (in  sale), 
of  ownership, 

definition 272 

personal   property 95 

real  estate 223 

of  quality 95 

Way,  Right  of 217 

Wife.    See  Married  Women. 

Without  Recourse 134 

Witness  (to  a  deed) 222 

Work,  Agreement  to  do 155-159 

Written  Contract, 

when  necessary.22,  36,  219,  226.,  236 

form  of 38 

signature  by  one  party 38 

signature  by  agent 39,  221 

See  also  Deed,  Mortgage,  Lease. 


A  TREATISE  ON  PHYSIOLOGY  AND  HYGIENE. 

FOR  EDUCATIONAL  INSTITUTIONS  AND  THE   GENERAL  READER. 
By  JOSEPH  C.  HUTCHISON,  M.D., 

President  of  the  New  York  Pathological  Society;  Vice-President  of  the  New  York 

Academy  of  Medicine ;  Surgeon  to  the  Brooklyn  City  Hospital ;  and  late 

President  of  the  Medical  Society  of  the  State  of  New  York. 


Fully  Illustrated  with  Numerous  Elegant  Engravings.    12mo.    300  pages. 


1.  The  Plan  of  the  Work  is  to  present  the  leading  facts  and  principles 
of  human  Physiology  and  Hygiene  in  language  so  clear  and  concise  as 
to  be  readily  comprehended  by  pupils  in  schools  and  colleges,  as  well  as 
by  general  readers  not  familar  with  the  subject.  2.  The  Style  is  terse 
and  concise,  yet  intelligible  and  clear;  and  all  useless  technicalities  have 
been  avoided.  3.  Tlie  Range  of  Subjects  Treated  includes  those  on  which 
it  is  believed  all  persons  should  be  informed,  and  that  are  proper  in  a 
work  of  this  class.  4.  TJie  Subject-matter. — The  attempt  has  been  made 
to  bring  the  subject-matter  up  to  date,  and  to  include  the  results  of  the 
most  valuable  of  recent  researches  to  the  exclusion  of  exploded  notions 
and  theories.  Neither  subject — Physiology  or  Hygiene — has  been  elabo- 
rated at  the  expense  of  the  other,  but  each  rather  has  been  accorded  its 
due  weight,  consideration,  and  space.  The  subject  of  Anatomy  is  in- 
cidentally treated  with  all  the  fullness  the  author  believes  necessary  in  a 
work  of  this  class.  5.  The  Engravings  are  numerous,  of  great  artistic 
merit,  and  are  far  superior  to  those  in  any  other  work  of  the  kind, 
among  them  being  two  elegant  colored  plates,  one  showing  the  Viscera 
in  Position,  the  other,  the  Circulation  of  the  Blood.  6.  The  Size  of  the 
work  will  commend  itself  to  teachers.  It  contains  about  800  pages,  and 
can  therefore  be  easily  completed  in  one  or  two  school  terms. 

The  publishers  are  confident  that  teachers  will  find  this  work  full  of  valuable 
matter,  much  of  which  cannot  be  found  elsewhere  in  a  class  manual,  and  so  pre- 
sented and  arranged  that  the  book  can  be  used  both  with  pleasure  and  success  in 
the  schoolroom.  

"  Many  of  the  popular  works  on  Physiology  now  in  use  in  schools,  academies,  and 
colleges,  do  not  reflect  the  present  state  of  the  science,  and  some  of  them  abound 
in  absolute  errors.  The  work  which  Dr.  Hutchison  has  given  to  the  public  is  free 
from  these  objectionable  features.  I  give  it  my  hearty  commendation." — SAMUEL 
G.  ARMOR,  M.D.,  late  Professor  in  Michigan  University. 

"This  book  is  one  of  the  very  few  school  books  on  these  subjects  which  can  be 
unconditionally  recommended.  It  is  accurate,  free  from  needless  technicalities, 
and  judicious  m  the  practical  advice  it  gives  on  Hygienic  topics.  The  illustrations 
are  excellent,  and  the  book  is  well  printed  and  bound.  "—Boston  Journal  of 
Chemistry. 

"  just  the  thing  for  schools,  and  I  sincerely  hope  that  it  may  be  appreciated  for 
what  it  is  worth,  for  we  are  certainly  in  need  of  books  of  this  kind."— Prof.  AUSYIN 
FLINT,  Jr.,  Professor  of  Physiology  in  Bellevue  Hospital  Medical  College,  New  York 
City,  and  author  of  "  Physiology  of  Man."  etc.,  etc. 

"I  have  read  it  from  preface_  to  colophon,  and  find  it  a  most  desirable  text-book 
for  schools.  Its  matter  is  judiciously  selected,  lucidly  presented,  attractively 
treated,  and  pointedly  illustrated  by  memorable  facts:  and,  as  to  the  plates  and 
diagrams,  they  are  not  only  clear  and  intelligible  to  beginners,  but  beautiful  speci- 
mens of  engraving.  I  do  not  see  that  any  better  presentation  of  the  subject  of 
physiology  could  tie  given  within  the  same  compass. " — Prof.  JOHN  ORDRONAUX, 
Professor  of  Physiology  in  the  University  of  Vermont,  and  also  in  the  National 
Medical  College,  Washington,  D.  C. 

The  above  work  is  the  most  popular  work  on  the  above  subjects  yet  published.     It  is 
used  in  thousands  of  schools  tnth  marked  success. 

Published  by  CLARK  &  MAYNABD,  New  York. 


New  and  Thoroughl 

THE  GOVERN  MEL, 

A  YOUTH'S  MANUAL  OF  INSTRUCTION  IN  THE  PRINCIPLES  OF 
CONSTITUTIONAL  GOVERNMENT  AND  LAW. 

PAET  I. — Principles  of  Government:  1,  General  Principles 
of  Government — 2,  Government  in  the  State — 3,  The  United 
States  Government.  PAET  II. — Principles  of  Law:  1,  Com- 
mon and  Statutory  Law  (or  Municipal  Law) — 2,  International 
Law.  By  ANDREW  W.  YOUXG,  author  of  "American  States- 
man," "  Citizen's  Manual  of  Government  and  Law,"  etc.,  etc. 
New  edition.  Thoroughly  revised.  By  SALTER  S.  CLARK, 
Counsellor  at  Law.  300  pp.,  12mo,  cloth. 

"  Our  Government,  to  be  loved  and  cherished  as  it  should  be,  must  be 
understood ;  and  to  be  understood,  it  must  be  studied:  and  this  can  only 
be  done,  by  the  masses,  in  the  public  free  schools  of  the  country.  '  The 
Government  Class  Book 'is  a  most  valuable  contribution  to  this  great 
object,  and  peculiarly  adapted  to  use  in  the  public  schools.  A  careful 
study  of  it  will  render  any  young  man  or  woman,  of  good  common 
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f*  it  in  most  of  the  schools  and  academics  of  the  country?" — Hfln. 
NEWTON  BATEMAX,  late  State  Superintendent  of  Schools,  Illinois. 

"  "We  hail  all  such  class  books  as  this.  We  are  amazed  at  the  almost 
utter  neglect  of  training  in  the  science  of  national  self -government 
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A  young  prince  win  should  not  be  specially  educated  for  his  coming 
responsibilities  would  be  a  monstrosity,  and  his  guardians  would  bo  held 
culpably  accountable.  And  in  this  country  every  youth  is  heir-apparent. 
The  book  before  us  is  admirably  systematized,  and  its  arrangement  is 
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practical,  and  adapted  to  the  purposes  of  an  elementary  text-book.  And 
we  sincerely  hope  it  may  be  rewarded  by  a  large  sale  not  only,  but  by  an 
extended  influence  in  promoting  the  study  of  legal  and  political  prin- 
ciples amongst  young  and  old." — Christian  Intelligencer. 

"  '  The  Government  Class  Book '  is  especially  valuable  on  account  of 
the  prominence  which  it  gives  to  State  Government,  and  for  its  closing 
chapters  on  general  legal  facts  and  principles.  It  contains  multainparxo. 
Had  such  a  book  come  into  my  hands  when  a  boy  in  the  common  schools, 
it  would  have  been  held  as  a  priceless  treasure.  The  book  is  valuable  in 
view  of  its  choice  contents,  and  as  a  production  in  the  direction  of  the 
new  education  nowsought  for  in  our  common  schools." — Hon.  D.  BURT, 
State  Superintendent  of  Public  Instruction,  St.  Paul,  Hiun. 

Although  this  revised  edition  of  the  above  work  has  been  published  but  a  short  time 
it  has  already  been  introduced  with  marked  success  in  hundreds  of  schools  in  all 
parts  of  the  country. 

Published  by  CLARK  &  MAYNARD,  New  York. 


